As discussed in an earlier Legal Update,1 substantial uncertainty exists over whether companies in bankruptcy are eligible for loans under the Paycheck Protection Program, or PPP, which was established by the CARES Act to support small businesses by offering SBA-guaranteed loans on advantageous terms. Several recent bankruptcy court decisions underscore this uncertainty.
The CVA challenge
The landlords’ claim against the Debenhams CVA was put forward on five grounds:
1. Future rent is not a “debt” and so the landlords are not creditors, such that the CVA cannot bind them
REJECTED: The definition of “debt” is broad enough to include pecuniary contingent liabilities, such as future rent.
2. A CVA cannot operate to reduce rent payable under leases: it is automatically unfairly prejudicial