New Look and Virgin Active rulings pave way for further restructurings

New Look and Virgin Active rulings pave way for further restructurings

The High Court ruling in favour of New Look, following the challenge to its restructuring plan by landlords, has served to cement the role of the Company Voluntary Arrangement as a vital tool in any restructuring practitioner’s armoury.

As businesses seek to reopen and rebuild following the pandemic, the judgement underlines the use of a CVA as a lifeline for those across the retail, hospitality and leisure industries who have been hit hard by the crisis, enabling them to restructure their liabilities while providing better outcomes for creditors than the alternative of administration.

While the judgment contains a number of comments which suggest the need for some degree of restraint remains, it may still do little to dampen some of the long-running tensions between tenants and landlords.

Tenants, buoyed by the ruling, should feel empowered to seek greater flexibility around rental agreements, including moves towards turnover-based rents.

Conversely, landlords, who argue they are disproportionately impacted by CVAs and who are battling with reduced incomes in the wake of the commercial rent moratorium, may find they have less room to manoeuvre in terms of the ability to mount legal challenges to arrangements that they perceive to be unfair.

However, the debate around the use of CVAs doesn’t quite end with the New Look decision.

Following today’s judicial sanctioning of the Virgin Active Restructuring Plan - a new process introduced last year by the Corporate Insolvency and Governance Act 2020 - it now appears that landlord liabilities can be legitimately ‘crammed down’ under this new procedure too.

It also remains to be seen whether the outcome of the Regis CVA challenge, also expected shortly, adds any further guidance.

As lockdown restrictions ease and businesses start to rebuild, the situation for many organisations remains perilous. Yes, there will be something of a bounce as consumers flock back to shops, gyms and restaurants – but uncertainty remains around how long any bounce will last.

And with Government support packages set to unwind, and liabilities needing to be repaid, the old adage that more businesses fail coming out of a recession than do going into it has never felt more pressing.

Against this backdrop, this week’s rulings will provide a degree of reassurance that there remains a full canvas of rescue options available to those multi-locational businesses who require support.


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Will Wright

Will Wright

Head of Restructuring

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