The retail sector and its suppliers operate at the sharp end of the economy and feel the impact of tighter consumer spending with more immediacy than most other sectors.

Background

The subject of gratuitous alienations is a problematic area for the property practitioner. Timing is all-important, and often it only becomes an issue for insolvency reasons retrospectively. Put simply of course, in lay terms a gratuitous alienation is no more than a gift, and there is nothing to prevent an owner of property gifting it to someone if he chooses.

The lengthening of the restoration period for dormant companies may make a solvent liquidation an attractive option for some companies. James Stonebridge examines the impact of changes introduced under the Companies Act 2006.

Ohio-based, 102-year-old automobile parts manufacturer Dana Corporation and 40 of its subsidiaries filed for chapter 11 protection in the U.S. in March 2006. Dana’s operations, however, extend well beyond the borders of the U.S. — the company has 46,000 employees in 28 countries. Integrating a complex restructuring of Dana’s U.S. operations in chapter 11 with Dana’s extensive operations and obligations abroad has posed some unique challenges to Jones Day’s restructuring professionals.

In September 2003, PRG Powerhouse Limited bought the Powerhouse business and its leases. As a condition of the sale, the landlords of various stores accepted a guarantee from Powerhouse’s parent company in respect of Powerhouse’s obligations under the leases.

Re Trident Fashions PLC: Exeter City Council v Bairstow [2007] EWHC 400 (Ch)

In March 2007 the High Court ruled that that non-domestic rates are payable as an expense of the administration as a “necessary disbursement” under Rule 2.67(1)(f) Insolvency Rules 1986 (IR), in priority to payment of the administrator’s remuneration.

In an important decision for commercial property landlords, the High Court in Prudential Assurance Co Ltd and Others v PRG Powerhouse Limited and Others has ruled that a CVA (defined below) cannot operate so as to prevent landlords from enforcing a parent company guarantee. The Court's decision however was reached on the basis that to determine otherwise would have been "unfairly prejudicial" to the landlords.

How to get out of a guarantee

There are not many legal cases which are claimed to have a potential financial impact of £38bn across the property industry, or to represent ‘Armageddon’, but both these claims were made in relation to Prudential Assurance Company Ltd v PRG Powerhouse Limited [2007]. While that may have been a little over the top, it is not hard to see the reasons for alarm.

ARMAGEDDON?

Freakley v Centre Reinsurance International Company & Ors [2006] UKHL 45

This case concerns whether a claim to reimbursement of claims-handling expenses should have priority over other creditors on insolvency of the insured.