Revolution Bars Limited, Re

For a restructuring plan under Part 26A of the Companies Act 2006, the relevant alternative is the outcome the court considers most likely if the plan is not sanctioned. It need not be more likely than all other outcomes combined.

In assessing whether dissenting creditors are worse off, the court may rely on rational, coherent evidence from the company and its professional advisers, while testing that evidence critically. A plan may treat creditors differently where the differences reflect the relative value and contribution of the assets or stakeholders concerned. The court should consider fairness across the dissenting classes where the circumstances require it, but should not invent objections that dissenting creditors have not articulated.

Revolution Bars Limited applied for sanction of a restructuring plan under Part 26A of the Companies Act 2006. The plan sought to compromise claims of secured and preferential creditors, landlords, business-rate creditors, other property creditors and an intra-group creditor.

Several classes failed to approve the plan by the statutory majority or arguably did not hold valid meetings. The company therefore relied on the cross-class cram-down provisions in section 901G. The central issues were the relevant alternative, the returns creditors would receive in that alternative, whether the statutory conditions for cram-down were met, and whether the plan fairly shared the restructuring benefits.

1. Plan sanctioned. The court sanctioned the restructuring plan under Part 26A of the Companies Act 2006.
2. The relevant alternative under section 901G(4) was the outcome most likely to occur if the plan were not sanctioned. It was not necessary to show that the proposed administration was more likely than all other possibilities combined. The evidence of the company’s directors and advisers was rational, coherent and unchallenged, and the court found no sufficient reason to reject it.
3. The court accepted the projected creditor returns in the relevant alternative. The calculations properly took account of likely value realised through an accelerated sale process, continuing rent and possible reletting of sites. Each dissenting class would therefore be no worse off under the plan, satisfying Condition A. Condition B was also satisfied because at least the secured creditor, which had a genuine economic interest, approved the plan.
4. The court declined to treat the distinction between creditors in the money and out of the money as a complete answer to fairness. Although the reasoning in Re Virgin Active Holdings was not doubted, the Class B1 landlords were in the money and, in the circumstances, fairness had to be considered across all dissenting classes.
5. The absence of articulated objections was material. A creditor seeking to resist sanction should identify why the proposed allocation is unfair, what allocation would be fairer, and whether that alternative is deliverable. The court should not withhold sanction on impressionistic objections of its own.
6. Differential treatment was not inherently unfair where it reflected the relative value of sites, the contribution of stakeholders to the future rescue, or the likely outcomes in the relevant alternative. The plan was not unfair and was sanctioned.