“Of the target cumulative EBITDA it is estimated that£75 million will be required for operational reinvestment. That provides a threshold for the calculation…”
“…The Plan Companies expect Modella, as ultimate shareholder, to extend the maturity on the Modella Facility Agreement. The Plan Companies also expect it will be possible to agree an extension to the ABL Facility or, based on the forecast financial position of the Plan Companies by the end of June 2029, to have viable options to refinance the ABL Facility. The maturity of the ABL Facility being three years away is well outside any standard timeline for considering refinancing options, however, so no discussions have yet taken place with the ABL Creditor.”
“new money is a far more important contribution than the writing off an existing unsecured debt which may, in the circumstances, be entirely under water.”
“[160] …As a matter of principle, when the court exercises its discretion to impose a plan upon a dissenting class, it subjects that class to an enforced compromise or arrangement of their rights in order to achieve a result which the assenting classes of creditors consider to be to their commercial advantage. In my judgment, that exercise of a judicial discretion to alter the rights of a dissenting class for the perceived benefit of the assenting classes necessarily requires the court to inquire how the value sought to be preserved or generated by the restructuring plan, over and above the relevant alternative, is to be allocated between those different creditor groups.”
“There can be no serious suggestion that a Plan Creditor who previously supported the Plans (prior to23 June 2026 ) would have been persuaded to vote against the Plans because they did not like the fact that certain Plan Creditors were to receive more at the expense of Modella qua shareholder.”
“Sometimes at convening hearings a potential roadblock to the exercise of the jurisdiction is identified in the form of some uncertainty whether the plan may not be recognised or enforced in any relevant foreign jurisdiction. Here there is no such problem, except what might be a footnote in a sense that there is a single lease property in Glasgow which is governed by Scots law. However, Mr Perkins has referred me to the case of Phillips v Allan (1828) 108 ER 1120, which is now I think nearly 200 years old, demonstrating that, as one would expect in an English insolvency process of this kind it is automatically recognised and enforced across the border.”
“100. Where there is no cross-class cram down, the principles established in the context of schemes of arrangement remain applicable ([115] to [117]). Those were summarised by Snowden J in Re Noble Group (No.2) Ltd[2019] 2 BCLC 548 at [17] as follows: “(i) At the first stage, the court must consider whether the provisions of the statute have been complied with. This will include questions of class composition and whether the statutory majorities were obtained and whether an adequate explanatory statement was distributed to creditors. (ii) At the second stage, the court must consider whether the class was fairly represented by the meeting and whether the majority were coercing the minority in order to promote interests adverse to the class whom they purported to represent. (iii) At the third stage, the court must consider whether the scheme is a fair scheme which a creditor could reasonably approve. Importantly, it must be appreciated that the court is not concerned to decide whether the scheme is the only fair scheme or even the “best” scheme. (iv) at the fourth stage, the court must consider whether there is any “blot” or defect in the scheme that would, for example, make it unlawful or in any other way inoperable.”
“[20] The classic formulation of the principles which guide the court in considering whether to sanction a scheme was set out by Plowman J in Re National Bank Ltd[1966] 1 WLR 819 at 829 by reference to a passage in Buckley on the Companies Acts (13th edn, 1957) p 409, which has been approved and applied by the courts on many subsequent occasions: “In exercising its power of sanction the court will see, first, that the provisions of the statute have been complied with; secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. The court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting; but at the same time the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is empowered to bind, or some blot is found in the scheme.” [21] This formulation in particular recognises and balances two important factors. First, in deciding to sanction a scheme under s425, which has the effect of binding members or creditors who have voted against the scheme or abstained as well as those who voted in its favour, the court must be satisfied that it is a fair scheme. It must be a scheme that “an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve”
“the general requirement to consider whether there has been a fair distribution of the restructuring surplus is to be treated as overriding and will necessarily take into account, albeit in overall terms, the treatment of the dissenting class.”
“The principles I intend to apply are these: (1) There must be a fair sharing of the burden of the restructuring plan amongst those whose rights are compromised and a fair allocation of its benefits (the value preserved or generated by the plan) to and between them. (2) The assenting classes will have made their own judgment upon that question, and the concern of the Court is to look at it from the perspective of the dissenting classes and to ask why the compromise approved by the assenting classes should be imposed upon them. (3) The burden lies upon the plan company to persuade the Court that there is a fair sharing of the burdens and of the benefits even if no objectors appear at the sanction hearing. (4) The starting point (but only the starting point) is the treatment of the dissenting class in the relevant alternative. (5) Where the relevant alternative is an insolvency process the initial expectation will be pari passu treatment of creditors within each insolvency class. (6) Differential treatment within an insolvency class is permissible if justified on proper grounds. (7) When considering whether the treatment of a class or any differential treatment within a class is “fair” the primary focus of the Court is upon their interests qua creditor. (8) When considering the sharing of the burdens and the benefits the Court is not confined to a consideration of the restructuring plan itself but is entitled to stand back and consider also the effect of the restructuring plan on those who are not parties to the compromises (such as creditors outside the scope of the plan or shareholders). (9) When considering the sharing of the burdens and the benefits the Court is entitled to take into account the source of the benefits (how the value is preserved or generated by the plan). (10) When assessing the burdens and benefits the court is concerned with the substance not the form: the provision of new money on terms more advantageous to the provider than would be required by a lender in the market is in reality a benefit conferred on the provider rather than a contribution to the cost of the plan. (11) The Court will have regard to the evolution of the restructuring plan and will seek to assess whether it is a genuine attempt to formulate a fair and reasonable solution to a critical problem or an attempt to impose arbitrary compromise terms upon creditors with a view to extracting advantage in a critical situation.”
“That latter point also brings me back to the statutory litmus test of fairness: the comparison with the Relevant Alternative. Having accepted (as I have) that the Relevant Alternative is insolvent administration, and that this is fairly imminent if the Plan is not sanctioned, and having accepted also that the differential treatment as between the Creditor classes is not unfair, the statutory test supports sanction of the Plan.”
“The dissenting classes are all unsecured creditors. In an asset-realising administration they would rank pari passu. Under the restructuring plan within the category of unsecured creditors there is differential treatment. All do better than in the relevant alternative, but the degree of adjustment of their rights varies as does the compensation for that adjustment (because that compensation reflects their respective returns in the relevant alternative). The differential treatment within the landlord class has an established and rational basis; those who have in the past made and will in the future make the greatest contribution to the preservation and success of the ongoing Poundland business benefit more than those whose properties are over-rented and have contributed to the present crisis. Nor is this differential treatment imposed upon an unwilling landlord: each has a “break right” enabling market opportunities to be exploited.”
“In the usual way, the Landlord Creditors have been placed into different categories by reference to the profitability of the relevant leased premises. The authorities establish that this is a fair way to treat landlords. It is unnecessary to decide whether the new terms of the leases set out in the Plans are better or worse than the Plans that might be available in the market, which might be a very difficult task. This was explained in the case of see Lazari Properties 2 Ltd v New Look Retailers Ltd [2021] Bus LR 915 at paragraphs 238 and 239 in the decision of Zacaroli J (as he then was) which is set out under paragraph 100 of the skeleton argument: “Finally, I should deal with the contention that in certain respects, the reduced rent under the CVA was below market rates. At an earlier stage in the proceedings, the applicants sought to argue that this was true of turnover rent payable generally to Category B Landlords. In the absence of any expert evidence as to market value, however, that was abandoned save in respect of a very small sub-category of Category B1 Landlords (in which a cap is placed on the turnover rent). In relation to Category C Landlords, it is accepted that the reduction of rent to nil, after the notice period, must have the effect of reducing it below market rates. In relation to rent falling due after the date the landlords could have terminated, however, the answer to the alleged unfairness lies—for the reasons given above—in the right to terminate. For the reasons already given, I do not accept that Norris J in Debenhams[2020] BCC 9 laid down a principle that modifications to a lease could not reduce the rent below market rates, certainly insofar as the period after the lease could have been terminated is concerned.”” “Finally, I should deal with the contention that in certain respects, the reduced rent under the CVA was below market rates. At an earlier stage in the proceedings, the applicants sought to argue that this was true of turnover rent payable generally to Category B Landlords. In the absence of any expert evidence as to market value, however, that was abandoned save in respect of a very small sub-category of Category B1 Landlords (in which a cap is placed on the turnover rent). In relation to Category C Landlords, it is accepted that the reduction of rent to nil, after the notice period, must have the effect of reducing it below market rates. In relation to rent falling due after the date the landlords could have terminated, however, the answer to the alleged unfairness lies—for the reasons given above—in the right to terminate. For the reasons already given, I do not accept that Norris J in Debenhams[2020] BCC 9 laid down a principle that modifications to a lease could not reduce the rent below market rates, certainly insofar as the period after the lease could have been terminated is concerned.””
“The Court will have regard to the evolution of the restructuring plan and will seek to assess whether it is a genuine attempt to formulate a fair and reasonable solution to a critical problem or an attempt to impose arbitrary compromise terms upon creditors with a view to extracting advantage in a critical situation.”
“The BL Landlords will contend at the Sanction Hearing that, even if the jurisdictional requirements for sanction of the Plan and conditions for cramming-down classes of Landlord Creditors under s 901G CA 2006 are satisfied, the Court should reject the Plan on discretionary grounds. The Plan involves a wholly unfair allocation of the burdens and benefits of the restructuring: the Landlord Creditors will be required to finance most of the turnaround of the Business through rent reductions; but they will receive no more than 3% of the likely upside. In contrast, the Plan Companies;’ private equity owner, Modella, will receive 97% of that upside.”
“…those are the better sites and there is a positive benefit to the company from the landlords of those sites not terminating their leases.”
“…the existence of the termination right strengthens my argument that the landlords are contributing new money. Just as Modella has chosen to advance the new money loan of 15 million, the plan…puts Class A Class B1 to B4 landlords to an election. They can choose to get off the bus or they can choose to stay on. If they choose to stay on, the contribution that they are making is more than is needed to plug the drain to the company’s financial performance. The years two and three rent reductions are all that is needed to plug the drain…The additional rent reductions in year one are a contribution to cash flow. And I say that that is just as much new money as an injection of cash… It’s a choice being made by the relevant landlords to invest in the business, and they should get their investment back…it is that additional element which justifies…the security and the repayment in year three.”
“[220] …the loss of future rent is not forced upon the landlords by the CVA, but is the consequence of the company’s insolvency…. [221]…the reduction in rent and modified terms are not forced on Compromised Landlords: the inability to pay full rent is the consequence of New Look’s insolvency and the reduction in rent and other modifications only apply if the relevant Compromised Landlord does not opt to terminate its lease.”
“It obviously isn’t a loan. It’s not new cash coming in that’s advanced: it is a deferral of an obligation that already exists on which they would only receive pence in the pound in the alternative scenario to the plan, and it simply cannot carry the same weighting.”