CR-2025-004622 - [2025] EWHC 2276 (Ch)

Because the restructuring plan has not been approved by all classes of creditor the question arises whether the Court should exercise its power to “cram down” the dissenting creditors. There are two threshold requirements.

First, section 901G(3) of the 2006 Act requires that no member of the dissenting class shall be any worse off under the restructuring plan and it would be in the relevant alternative. This is to be analysed primarily, but not exclusively, in terms of the anticipated return on their claim. In the instant case that test is satisfied in relation to each dissenting class. Their rental and property cost claims during the anticipated period of an administration are preserved. They receive 200% of their anticipated return in a “high case” relevant alternative. They receive that by way of payment out of the Plan Creditor Fund constituted by the Plan Company’s shareholder for the compromised creditors: and they do not have to wait until the end of the administration to receive that distribution. Landlords avoid having involuntary possession forced upon them, but remain able to recover it if they so desire.

Second, section 901G(5) of the 2006 Act requires that the restructuring plan be assented to by at least one class of creditor which would receive a payment or have a genuine economic interest in the relevant alternative. This test is also satisfied. The restructuring plan has been approved, in particular, by the Secured Creditor, and the Class B1 and B4 Landlords. The application of this test requires careful scrutiny to see the that the statutory condition has not been satisfied by the vote of an artificial class created with the object of it approving the plan and therefore providing the restructuring plan with the requisite anchor for the purposes of the section. In the instant case no such issue arises.

The satisfaction of those two threshold conditions opens up the exercise of the discretion to approve the restructuring plan notwithstanding its failure to secure the approval of all classes. The purpose of this discretion is to enable the Court to prevent any one class of creditor from exercising an unjustified right of veto: Re Petrofac [2025] EWCA Civ 821 at [131]. Guidelines as to the exercise of this discretion are developing on a case-by-case basis, powerful guidance being provided by the three recent Court of Appeal decisions in Re AGPS Bondco plc [2024] EWCA Civ 24, Re Thames Water Utilities Holdings Ltd [2025] EWCA Civ 475 and Petrofac (supra).

The principles I intend to apply are these:-

In the instant case no dissenting creditor has appeared to argue which of the foregoing principles is violated by the present restructuring plan: and the Plan Company, bearing the burden of persuading the Court that the restructuring plan should be approved, cannot be expected to argue the case for the dissenting creditors. So, I must undertake the analysis unaided. Having done so in my judgment this restructuring plan ought to be approved as a genuine attempt to bridge a funding gap whilst an operational restructuring is effected.

The dissenting classes are all unsecured creditors. Within the category of unsecured creditors there is differential treatment. All do better than in the relevant alternative, but the betterment is greater for some than for others. Landlords do relatively better than the Business Rate Creditors and the General Creditors: but both of those latter classes have approved the plan and do not complain that this is unfair treatment. There is differential treatment of different landlords, but this differential treatment derives from a carefully applied rational methodology. Those who have historically contributed significantly to the present financial predicament and prospectively have the least to contribute to the transformed business derive proportionately less benefit from the value preserved or generated by the adoption of the plan. Those who prospectively have more to contribute to the transformed business because of anticipated profitability or perceived strategic importance face a more limited compromise of their claims.

In this connection I was puzzled why the Class A (and for that matter Class B2 and Class B3) Landlords did not approve the plan whereas a significantly more impaired class (Class B4) did approve it and upon grounds which satisfy the rationality test. I think the answer is to be found in the presence in these dissenting classes of two multiple-site landlords who “block voted” against the plan in every class. One was Fraser Group and the other British Land.

In Class A (the least impaired group of landlords) the votes against the plan amounted to 41% by value, being £446,474 of which Frasers voted £330,449. In Class B2 (where 73% would have approved the plan) the votes against the plan amounted to 15% by value being £1.074 million of which Frasers voted £509,832. In class B3 the entirety of the vote against the plan was cast by Frasers. One can well understand why a rival high street clothing retailer with a notable skill in acquiring additional brands out of administration might prefer to see the Plan Company cease operations and go into administration: but it is not easy to see why, from the perspective of a pure landlord, that is the preferable alternative.

British Land was another multiple landlord, with 15 sites in the excluded estate and 7 sites within the scope of the restructuring plan (in Classes A, B1, B3 and C2). It has been in contact with the Plan Company since 20 June 2025 and, following correspondence from its solicitors received immediately after the plan meetings on the 1 August 2025, was invited to state its objections to the restructuring plan. It declined to do so. It is again not easy to see why, from the perspective of a landlord, it was preferable to risk the closure of the 15 stores on the excluded estate by voting against the proposals for dealing with the 7 in-scope stores.

The Plan Company has commissioned from PwC a Plan Benefits Report which sets out the percentage level of return that each class of Plan Creditor is anticipated to receive in respect of its contribution to the benefits preserved or generated by the plan. The Skeleton Argument of Mr Weaver KC and Mr Abraham contains the following table demonstrating the results of the exercise:-

This table is prepared using nominal values and standard assumptions (e.g. that dilapidation claims equate to £15 per.sq.ft. across the estate). It is not weighted to reflect lease termination dates (so that early expiry dates - many compromised leases will expire within the Rent Concession Period - will be reflected in lower apparent returns). It does not seek to value the benefit to a landlord of continued occupation by a tenant and the avoidance of empty property costs. It does not value as a contribution the guarantee that the Secured Lender is providing to support the continuing Barclays facilities. It therefore provides no more than a very approximate guide to horizontal comparisons. But it does demonstrate (i) that the treatment of the dissenting classes is certainly not out of line with that of the assenting classes; (ii) that all Landlords are provided with a Day 1 return on their contribution; and (iii) that the Secured Creditor is making the most significant contribution in that it will not recover its existing and new loans even in 3 years. The table, of course, takes no account of the potential for participation in the Profit Share Fund, which is therefore an unstated benefit. Nor does it take into account the right of any landlord to recover possession if of the view that a better return is available in the market.

Taking a step back and looking outside the confines of the restructuring plan itself, there is no unfair allocation of benefit to those who are not plan creditors. As to the excluded creditors, there are sound commercial reasons for not including them within the scope of the plan. There are parties with whom for operational reasons an unbroken relationship on existing terms is essential to the implementation of the Transformation Plan; alternatively, parties with whom a new relationship on market terms has been negotiated reflecting the terms of the restructuring plan and in circumstances which do not call into question the results of any plan meeting.

As to the Plan Company’s shareholder, the equity value of the Plan Company will remain in negative territory unless by year 5 the business has achieved an annual growth rate of 4% and at that five year point the appropriate valuation multiple is around 5 (the present range is 4 to 6.5). That is the “break-even” point. Meanwhile the shareholder must constitute the Plan Creditors Fund on a non-recourse basis and dilute its returns by setting aside income for the Profit Share Fund. So the shareholder is making an immediate actual contribution to the cost of the restructuring plan in return for a potential benefit 5 years out on “high case” assumptions. There is no unfairness in that: and in any event the equity value derives to a significant degree to the generous rescue finance terms offered by Blue Coast in relation to the RCF.

In the result I was entirely satisfied that the restructuring plan ought to be approved.