Looking at the most recent figures on corporate insolvencies makes for worrying reading for landlords and occupiers alike, with overall numbers now exceeding pre-pandemic levels. Overall, corporate insolvencies increased by 17% in England and Wales since February 2022 and were a third higher than in February 2020.
On October 17, 2022, Justice Andrea Masley of the NY Supreme Court issued a decision and order denying all but one of the motion to dismiss claims filed by Boardriders, Oaktree Capital (an equity holder, term lender, and “Sponsor” under the credit agreement), and an ad hoc group of lenders (the “Participating Lenders”) that participated in an “uptiering” transaction that included new money investments and roll-ups of existing term loan debt into new priming debt that would sit at the top of the company’s capital structure.
On October 14, 2022, the Fifth Circuit issued its decision in Ultra Petroleum, granting favorable outcomes to “unimpaired” creditors that challenged the company’s plan of reorganization and argued for payment (i) of a ~$200 million make-whole and (ii) post-petition interest at the contractual rate, not the Federal Judgment Rate. At issue on appeal was the Chapter 11 plan proposed by the “massively solvent” debtors—Ultra Petroleum Corp. (HoldCo) and its affiliates, including subsidiary Ultra Resources, Inc.
On July 6, Delaware Bankruptcy Court Judge Craig T. Goldblatt issued a memorandum opinion in the bankruptcy cases of TPC Group, Inc., growing the corpus of recent court decisions tackling “uptiering” and other similar transactions that have been dubbed by some practitioners and investors as “creditor-on-creditor violence.” This topic has been a hot button issue for a few years, playing out in a number of high profile scenarios, from J.Crew and Travelport to Serta Simmons and TriMark, among others.
The temporary restrictions on winding-up petitions brought in under the Corporate Insolvency and Governance Act 2020 (“CIGA”) are wider than originally envisaged when first announced by the government in April 2020 and have now been extended until 30 September 2021.
The temporary restrictions on winding-up petitions brought in under the Corporate Insolvency and Governance Act 2020 (“CIGA”) are wider than originally envisaged when first announced by the government in April 2020 and have now been extended until 30 June 2021.
We reported in September that New Look's CVA had been approved by creditors, including provision for 400 of its store rents to be linked to turnover - see https://blog.charlesrussellspeechlys.com/post/102gf9i/a-new-look-for-commercial-rents
However, it seems that the controversial CVA is now going to be challenged in the courts by a number of the landlord creditors, including British Land and Land Securities. This will obviously be unwelcome news for the retailer on top of the arrival of a second lockdown, which will inevitably cause further disruption for its business.
On August 26, 2020, the Court of Appeals for the Third Circuit held that the Bankruptcy Code does not require subordination agreements to be strictly enforced in order for a court to confirm a cramdown plan, so long as the plan does not discriminate unfairly.
The government’s temporary changes to the insolvency rules to cater for Covid-19 – in particular the new restrictions on the presentation of winding-up petitions – have been well-publicised. These have now been packaged within an Act (the Corporate Insolvency and Governance Act (“CIGA”)) which also brought in significant, permanent changes to UK insolvency law.
Two of the classic self-help remedies open to landlords for recovering commercial rent arrears have traditionally been forfeiture and Commercial Rent Arrears Recovery (CRAR), but both of these have been restricted as a result of Government measures to support tenants during the coronavirus crisis. There is also a proposed ban on winding-up petitions for coronavirus-related debts, which is already being applied by the courts.
Amended CRAR Regulations