Landlords are receiving a deluge of requests to provide rent relief to commercial tenants whose operations have either been closed or substantially restricted as a result of state and local governments’ COVID-19 stay-at-home orders and related restrictions. Some tenants are using the threat of a bankruptcy filing as leverage to obtain these concessions. Meanwhile, landlords are facing their own challenges with mortgage lenders and servicers as they try to service real estate loans with limited available cash.
The Federal Court of Australia in Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472 has made orders to release the administrators of retailer The Colette Group (the Group) from personal liability for rent for a two-week period during the COVID-19 pandemic.
Previously we reported on debtors’ appeals to bankruptcy courts’ general equitable powers for assistance in weathering the COVID-19-induced economic storm. (Our original article may be viewed here.) This trend remains and bankruptcy courts are demonstrating a continued willingness to entertain and offer such relief.
The Corporate Insolvency and Governance Bill (“Bill”) published on 20 May 2020 proposes to introduce a number of significant reforms to UK restructuring and insolvency law . The scope of the Bill is wide ranging and includes measures to protect companies in financial difficulty as a result of the current pandemic. Several of the provisions contained in the Bill will have particular impact on the landlord and tenant relationship during the current COVID-19 crisis, which is the focus of this article.
Temporary prohibition against petitions on the basis of statutory demands
In the ten years before COVID-19, the national and global economy, along with business optimism, steadily improved. Some businesses, of course, failed as competitive pressures or mistaken assumptions led to missed projections, blown covenants, loan defaults, and financial restructuring, if not outright liquidation.
But a prudent ABL lender typically suffered little in a properly underwritten loan, even in a wind down. Receivables remained generally collectible, inventory readily converted into receivables, and machinery and equipment was salvageable at auction.
Status as of 09/06 12:00 CET
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Status as of 16/09
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The government recently published its Corporate Insolvency and Governance Bill which includes a temporary “ban” on statutory demands. In its current form, the ban will prevent landlords and other creditors from relying on statutory demands served between 1 March and 1 month after the Bill becomes law. The Bill also includes provision to prevent the winding up of companies where their inability to pay is due to Covid 19.
RE: A COMPANY (INJUNCTION TO RESTRAIN PRESENTATION OF PETITION)
Short Read:
Despite the law not yet being in force, the High Court has this week granted an unnamed high street retailer an injunction preventing one of its landlord creditors from presenting a winding-up petition against it on the expectation that the restrictions in the Bill will shortly be enacted.