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

It is first necessary to establish what is most likely to happen if the restructuring is not put in place. The evidence of Anthony Smith (the Chief Financial Officer of the Plan Company) is that the board considers that the most likely scenario, should the plan not be sanctioned, would be the entry of the Plan Company and its subsidiaries into administration, followed by a sale of the stock, brand and intellectual property. Depending upon the liquidity runway available this could take place either by way of a pre-pack sale after a short period of trading to enable a marketing exercise to be undertaken (“high case”): or alternatively, if there is insufficient liquidity to sustain a marketing period, then such a sale upon commencement of administration, which, because the exercise would be undertaken under pressure, would produce a less favourable outcome (“low case”). In neither case is it likely that any leasehold units would be included in the asset sale because none has a premium value. The liquidity runway is estimated to be three weeks, during which time the cost of the continued occupation of the various leasehold units would be treated as an expense of the administration.

The Court is necessarily reliant upon the evidence of those to whom the management of the companies has been entrusted as to what the most likely alternative (“the relevant alternative”) to the sanctioning of the plan would be. However, the Court does not simply accept that evidence but subjects it to scrutiny in the light of what it perceives to be the commercial realities. In the instant case I see no reason to doubt it. Rather, I consider that it is supported by four commercial realities.

First, it is clear on the evidence that the Plan Company is forecast to exhaust its present cash resources in the week commencing 8^th September, so that the liquidity runway from the sanction hearing date is short and some form of insolvency process is inevitable.

Second, although there is no evidence of attempts to tap the open market for funding for some process other than a short-term asset-realising administration, the nature of the asset base and the character of the trading performance are such that no source of such funding is likely to exist (as the dealings with Blue Coast itself tend to confirm).

Third, the expert report of Andrew Charters of Grant Thornton demonstrates that alternatives to an immediate sale of the stock, brand and IP in administration (he considered 10 possibilities) were either not viable or produced a lower potential return to creditors. One of the possibilities he considered was the inclusion within an asset sale of the most profitable leasehold units. This he regarded as not viable since (a) the most likely potential purchasers either (i) already had stores in the vicinity of these River Island units through which they could channel River Island products without adding to the cost base any additional retail premises or (ii) were themselves embarking upon a store reduction programme: and (b) assignment of leases of retail premises by companies in distress was operationally difficult since such occasions tended to be exploited by landlords. This possibility (and its downsides) was set out in paragraph 7 of the Practice Statement Letter dated 20 June 2025 and no one has challenged the opinion he offered.

Fourth, the expert report of David Purslow of Newmark analysed each of the business’s remaining 223 leasehold units and concluded that there is no leasehold premium value attributable to the Group’s leasehold estate. That is because upon examination of each unit the passing rent (which includes in some cases both the base rent and a turnover rent) is either at full market rate or in 79 cases is over-rented. This confirms the board’s assessment of what is realisable for value.

According to the evidence the estimated returns in the relevant alternative are as follows:-

Having dealt with the principal foundational issue I can deal more shortly with the remainder. It is, secondly, necessary to address jurisdictional questions. Thompsell J on 11 July 2025 considered these in a judgment (“the Convening Judgment” at [2025] EWHC 2047 (Ch)) giving reasons for ordering the convening of plan meetings (“the Convening Order”). At paragraph [26] of the Convening Judgment he decided that the restructuring plan was an “arrangement” made between “a company” and some part of its “creditors” for the purpose of section 901A of the 2006 Act; and at paragraph [29] that the Plan Company had encountered financial difficulties which affected its ability to carry on business as a going concern. I therefore do not need to address these issues again.

It is necessary, thirdly, to consider the constitution of the plan meetings. Paragraphs [42]-[46] of the Convening Judgment contain the judge’s reasons for the constitution of the 10 classes of creditor to which I have referred above. Nothing that has occurred since makes it necessary to revisit that issue. In particular, none of the compromised landlords has contended that they should have been an Excluded Creditor or that they have been placed in the wrong class (matters which ought in any event to have been raised at the convening hearing). Nor have the consensual variations of contractual obligations reached with some creditors, which are in line with the proposals contained in the restructuring plan, raised any class or voting issues.

Fourth, I must consider whether there has been compliance with the statutory conditions and with the terms of the Convening Order. Without descending into detail I can say that, having considered the evidence, I am satisfied that all requisite conditions have been complied with.

Fifth, I must record the outcome of the plan meetings. These were held, as directed, on 1 August 2025. The votes in favour of adopting the restructuring plan were as follows:-

Lastly, I must consider whether the Court can rely upon the outcome of the plan meetings. This involves a consideration of three aspects. (i) I am satisfied that there was an appropriate communication of the material necessary to enable each creditor to take an informed decision upon the question at issue. Paragraph [54] of the Convening Judgment contains recommendations for the clarification of the Explanatory Statement in certain respects and these recommendations were acted upon. (ii) I am satisfied that the arrangements for each class meeting were satisfactory. Each meeting was held on a digital platform. According to the Chairman’s report, there were no technical difficulties and nothing to suggest an inability to participate on the part of any creditor. Only the Business Rate Creditors availed themselves of the opportunity to ask questions. There was no request at any class meeting for a private consultation between the creditors attending. The Chairman did not perceive any coercion or oppressive conduct or other irregularity at any of the meetings. (iii) I am satisfied that there was fair representation at the relevant class meetings. The Secured Creditor was a single-member class. Representation at Landlords’ meetings varied from 93% by value to 41% by value and from 67% by number to 33% by number. There was lower representation in relation to other classes. The number of Business Rates Creditors was 208, and the meeting was attended by only 9% by value and 4% by number. The number of General Creditors was 52, dominated by an intercompany debtor, resulting in a turnout of 99.9% by value but only 6% by number. In each case the class appears to have consisted principally of a large number of members each with a relatively small claim so that the absence of attendance is more likely attributable to indifference rather than to an inability to participate. I see no reason for suspecting that those who did attend expressed views that were unrepresentative of the class generally.