Re Listrac Midco

The court sanctioned restructuring plans under Part 26A of the Companies Act 2006 for seven related companies in the Lifeways Group. The judge found that the statutory requirements in s.901F were satisfied for Midco, Bidco, LFL and LAL because the requisite majorities at the creditor meetings were achieved. For LCC, ACUKL and VML, although some creditor classes dissented (or had no meaningful attendance), the court concluded that s.901G enabled a cross-class cram down because the statutory trigger was engaged and both Condition A (the "no worse off" test) and Condition B (sufficient support among classes with a genuine economic interest) were met. The exercise of discretion favoured sanction: the Plans provided outcomes at least as good as the relevant alternative (insolvent administration or liquidation), no unfair prejudice or other blot was identified, the restructuring delivered overall value and secured creditors committed new money to stabilise the group.

Background and relief sought. The Lifeways Group comprises seven companies (Midco, Bidco, LFL, LCC, LAL, ACUKL and VML). The plan companies applied for court sanction of restructuring plans under Part 26A CA 2006 to implement a Lender Transaction in which secured creditors would reduce and restructure debt and provide new money in return for acquiring the majority of the group (save Midco). The Plans proposed modifications or compromises of certain lease liabilities and other unsecured claims and provided an uplift (110% of Estimated Insolvency Return) to compromised unsecured creditors compared with their expected return in the relevant alternative.

Procedural posture. Convening meetings were ordered by Trower J ([2023] EWHC 78 (Ch)). Meetings were held; some classes approved the Plans by the required 75% in value, while others dissented or had negligible attendance. The sanction hearing was before Adam Johnson J on 22 February 2023; judgment handed down 3 March 2023.

Issues framed.

• Whether statutory requirements for sanction were met: s.901F where the required majority was obtained and s.901G where cross-class cram down was relied upon.
• For s.901G, whether the statutory trigger applied when some classes dissented or had minimal attendance, and whether Conditions A (no worse off) and B (support by classes with a genuine economic interest) were satisfied.
• Whether the court should exercise its discretion to sanction the Plans, having regard to fairness, representation, bona fides of voting majorities, any blot or defect and wider commercial consequences.

Court's reasoning and conclusions. The judge held that the formal trigger in s.901G was engaged despite limited attendance at some class meetings because the statutory wording requires only that a dissenting class exist where the required 75% majority was not achieved at a meeting summoned under s.901C. Condition A was satisfied: those to be crammed down would not be worse off under the Plans than under the relevant alternative (administration or liquidation), and in many cases received a 10% uplift on their Estimated Insolvency Return. Condition B was satisfied because secured creditors (a class with a genuine economic interest) unanimously supported the Plans and would receive significantly more in the Plan than in the relevant alternative. On the discretionary evaluation, the Plans were ones that an intelligent and honest creditor might reasonably approve, no blot or material unfairness was demonstrated, excluded creditor classes were excluded for objective commercial reasons, and there had been no active, effective opposition that would undermine sanction. The court therefore sanctioned the Plans for all seven companies and made an order to that effect.

The application was granted. The court sanctioned the restructuring Plans for all seven Plan Companies and made an Order sanctioning them. The rationale was that statutory requirements under s.901F were satisfied where the requisite majorities were obtained and that, for companies where classes dissented, s.901G permitted a cross-class cram down because the statutory trigger was met and both Condition A (no worse off than the relevant alternative) and Condition B (support from classes with a genuine economic interest) were satisfied. The court also exercised its discretion in favour of sanction on grounds of fairness, representation and commercial necessity.