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.

Since our last blog on this topic, the English court has provided further guidance on certain key issues and novel features relevant to restructuring plans and schemes of arrangement in its recent judgments on Amigo Loans, Smile Telecoms, EDF & Man, Re Safari Holdings (Löwen Play) and Haya. This piece provides an overview of key points from these cases.

Recreational cannabis is now legal in 19 states and Washington D.C., driving the growth of legal cannabis sales estimated at $33 billion this year—up 32% from 2021—and expected to reach $52 billion by 2026.[1] This movement signals that financial investment in cannabis is not abating but accelerating notwithstanding the impact of the lingering COVID-19 pandemic.

Government support during the pandemic and extremely strong credit markets saw exceptional fund raising levels in 2021, in spite of a slower Q4. Borrowers secured increasingly favourable terms from their lenders, with only a little pushback as the year progressed. Private credit continued to compete for greater market share and found interesting opportunities in smaller and more complex names. 2021 has proved to be a record year for financings and the continued availability of cheap capital, with reasonable stability and outperformance from riskier credits.

The restructuring plan has so far proven to be a powerful tool to facilitate restructurings of complex capital structures. Two recent cases provide further helpful guidance for advisers when formulating a restructuring plan and for investors who may be affected by its terms.

Amicus Finance plc (in administration) ("Amicus")

As of November 1, 2021, dealers in security-based swaps (“SBS”) whose dealing activity exceeds certain de minimis thresholds (e.g., gross notional amount of $3 billion for credit default SBS, $150 million for other SBS, and $25 million for SBS where the counterparty is a special entity) are required to register with the SEC as a security-based swap dealer (“SBSD”) and to comply with the SEC’s regulations applicable to SBS.

On 29 September 2021 the High Court dismissed a challenge to Caffè Nero’s 2020 CVA brought by one of its landlords, Ronald Young. Young asserted that the CVA was unfairly prejudicial and subject to material irregularities (thereby engaging both grounds of challenge under s.6 of the Insolvency Act 1986), and that the CVA nominees and company directors had breached their duties by failing to adjourn or postpone voting on the CVA upon receipt of a late-in-the-day offer for the Caffè Nero group.

Most restructuring professionals will tell you that there is no “typical” restructuring. That is absolutely true. Every financially distressed business is different and the character and direction of its restructuring will be highly dependent upon, among others, its capital structure, its liquidity profile, and the level of support it can build for its reorganization among key stakeholder bodies. Nevertheless, there are some important similarities in the way that any company should initially address a distressed situation.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10 Regulations 2021) (the “Regulations”) will modify CIGA by extending certain restrictions on the use of winding up petitions, albeit on a more limited basis, in line with the tapering of government support measures introduced to combat the economic impact of COVID-19.

The English High Court has sanctioned the scheme of arrangement proposed by Provident Financial, by which the net liabilities of two Provident group companies to their redress creditors will be subject to a 90-95% haircut. This case raises two interesting questions.

Why was the scheme sanctioned when the recent Amigo Loans scheme was not?