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

A restructuring plan embodying these proposals was set out in a Practice Statement Letter of 20 June 2025, was the subject of engagement with the British Property Federation and with a leading agent representing some landlords and was debated with those individual creditors took a proactive role. Thus, consensual variations have been effected to the leases of the stores in Reading and Oxford Street, and to the commercial arrangements with the IT suppliers and vehicle suppliers (amongst the general creditors). In each case the variations agreed have been in line with what is proposed in the restructuring plan in relation to the relevant liability and I am satisfied have not prejudiced the interests of other creditors in the same class. I would note that some Business Rate Creditors have resisted at contested hearings any adjournment of a liability hearing (and have done so not only after the sending of the Practice Statement Letter but even after the making of the Convening Order). No Business Rate Creditor appeared at the sanction hearing and so I could not discover what might lie behind this policy: but on its face the policy seems regrettable – an unnecessary cost to the general body of rate and taxpayers, an unnecessary expense for a company in financial distress and an unnecessary burden upon an overstretched judicial system.

The proposed restructuring is to be funded by Blue Coast by means of an extension of its existing facilities to a new maturity date (31 December 2028) and the provision of new money by means of an immediate £35 million RCF (enhanced by an additional £5 million on 31 January 2026). A report of Pricewaterhouse Cooper LLP (“PwC”) in evidence establishes that this funding is provided on considerably more favourable terms (as regards interest rates and arrangement fees, and as regards the capitalisation of accruing liabilities) than would be available in the market and most notably lacks any provision for equity warrants such as might be expected in relation to such “rescue funding” provided by other market operators. In addition, Blue Coast will release and discharge all unpaid fees and waive all existing breaches. This continued and additional funding is the principal contribution to the financial adjustment required to bring about sustainable viability. The other element is the contribution of the compromised creditors (landlords and others) and to that I now turn.

The Class A Landlords own premises where only the smallest adjustment is required to achieve sustained viability of store operation. The restructuring plan generally contemplates amendments to leases for the period of 36 months from the Effective Date (“the Rent Concession Period”). But for Class A leases all rent, and all service charges, insurance charges, utility payments and like charges (“property costs”) will be paid in full during the Rent Concession Period and will be so paid on a monthly basis. All Class A leases will expire during the Rent Concession Period, and that will give rise to dilapidation claims which could destabilise recovery. Under the restructuring plan these dilapidation claims are to be released.

The Class B landlords own premises where profitability is marginal but where the Plan Company wishes to continue to trade during the remainder of the lease term. Differing adjustments are required to achieve sustained viability.

For premises owned by the Class B1 landlords rent arrears (effectively the June 2025 quarter-day rent) will be released; all property costs will be paid in full during the Rent Concession Period according to the lease term; 75% of the contractual rent will be paid monthly during the rent the Rent Concession Period; there will be no rent review during that period. 8 out of the 13 leases in this class are due to expire during the Rent Concession Period and any dilapidation claims so arising are to be released. Continuing leases will revert to contractual terms at the conclusion of the Rent Concession Period.

The leases of the Class B2 landlords are to be amended in the same way save that during the Rent Concession Period only 60% of the contractual rent will be paid. 7 out of the 10 leases in this class are due to expire during the Rent Concession Period. Likewise for the Class B3 landlords, save that during the Rent Concession Period only 50% of the contractual rent will be paid (during which period 7 out of the 9 leases in this class will expire). For the Class B4 landlords 25% of the contractual rent will be paid during the Rent Concession Period (during which period 5 out of the 6 leases in this class will expire).

Class C consists of premises whose performance or location mean that they cannot be retained in the medium or short term.

Class C1 are landlords of premises which are marginally profitable (before allocation of central costs) but are on a downward trend and cannot be sustained on a continued loss-making basis. Existing arrears are to be released, the contractual rent reduced to nil (though all property costs will be paid in full during the continued occupation). 21 out of the 24 leases in this class will expire during the Rent Concession Period and any dilapidations claims then arising will be released. In practical terms a landlord in this class may chose to leave the Group tenant in occupation for the remainder of the lease (thereby avoiding all empty property liabilities and the need for security arrangements) or may chose to recover possession if the market affords better opportunities. Any continuing lease will revert to contractual terms at the end of the Rent Concession Period.

Class C2 landlords are the owners of non-performing stores trading at a loss or marginally but in locations which do not feature in the transformation plan and where the Group would wish to cease trading after the Christmas 2025 and New Year trading period. Such leases are to be compromised in the same way as Class C1 save that, since a closure date is certain, the landlord is to have an additional break right exercisable after 19 January 2026.

No compromised landlord is to be compelled to accept the amendments proposed in respect of their lease. Each landlord is to have a period of 30 days following the Effective Date in which to serve a 28 -day notice to vacate the relevant premises, thereby enabling that landlord to offer the premises on the open market.

The Business Rate creditors are required, under the restructuring plan, to release all arrears and to compromise in full any business rates arising in the period commencing 21 days after the Effective Date and ending on 31 March 2026.

The General Creditors are required under the restructuring plan to release all their claims in full.

In return for these compromises the unsecured creditors will receive out of a Plan Creditor Fund to be constituted by the Plan Company’s shareholder (i) a payment equal to 200% of their estimated return in an administration (to the significance of which I will come); and (ii) the right to participate in a Profit Share Fund. The Plan Company will pay into the Profit Share Fund a sum representing 25% of the excess over £55 million profit before interest and tax (“the Profit Gateway”) made by the business (i.e. the Group and the two other operating subsidiaries of the Plan Company) during the five years following the Effective Date. The fund so created will be distributed pro rata to the compromised creditors. The Profit Gateway has been set at such a level as ensures that the compromised creditors share in the profits before there is any reduction in the Group’s net indebtedness to Blue Coast as at the commencement of the plan and before there is any return to shareholders. In addition, each compromised Class B and Class C landlord will receive a sum equal to 3 weeks rent and property costs (representing the trade-out period in administration).