Revolution Bars Limited, Re

The court considered an application under Part 26A of the Companies Act 2006 to sanction a restructuring plan and, because several creditor classes had not approved the plan, addressed the jurisdictional requirements for a cross-class "cram down" under section 901G. The judge accepted the Plan Company's evidence (supported by FTI's modelling) as to the relevant alternative (an administration and accelerated M&A process) and concluded that no dissenting class would be worse off under the Plan than in that alternative. The court also considered issues of class constitution, compliance with the convening order, the effect of a Deed of Contribution, and prospects of effectiveness in Scotland, and found no "blots" or unfairness sufficient to withhold sanction.

Background and parties:

• The Plan Company, a subsidiary of Revolution Bars Group plc, operates 48 leases for 43 sites and is loss-making following COVID-19 and subsequent trading pressures. The Group has limited cash and was forecast to run out of funds in the week beginning 24 August 2024.
• Key creditors included the Primary Secured Creditor (NatWest), the Secondary Preferential Creditor (HMRC), eight classes of landlords (Classes A, B1, B2, C), General Property and Business Rate Creditors, and an intra-group creditor, Inventive Service Company Limited (Service Co), with an intercompany balance of about £48 million.

Nature of the application: The Plan Company sought court sanction of a restructuring plan under Part 26A CA 2006 which (i) amended and extended the 2022 Facilities Agreement (including a c.£4 million write-off, extended repayment date, interest capitalisation and warrants), (ii) provided a short deferral for VAT, and (iii) "right-sized" lease liabilities across landlord classes with payments linked to 120% of an Estimated Administration Return.

Procedural posture: Sir Alistair Norris had granted liberty to convene meetings of eight creditor classes. At the meetings some classes assented while others (Class B1, B2, C and General Property/Business Rate Creditors) were treated as dissenting for the purposes of section 901G. No creditor attended court to oppose sanction.

Issues framed by the court:

• Whether statutory and jurisdictional requirements to convene meetings and to sanction a Plan were met;
• What was the "relevant alternative" for the purposes of section 901G and whether dissenting classes would be no worse off under the Plan than in that alternative (Condition A);
• Whether Condition B was met (sufficient consenting classes who would receive a payment or have a genuine economic interest);
• Whether there were any substantive defects or unfairness in the Plan (including the effect of the Deed of Contribution and enforceability in Scotland).

Court's reasoning:

• The judge accepted the Plan Company's and FTI's evidence that the most likely alternative, if the Plan failed, was an administration of the Plan Company and related Group companies with an accelerated M&A process and realisations of Class A/B1/B2 sites, exits of loss-making sites and limited returns to many unsecured creditors.
• FTI's modelling compared likely returns under the Plan with returns in the relevant alternative using the Estimated Administration Return; the court accepted those methodologies and conclusions as rational and coherent.
• On that basis the court found Condition A satisfied because dissenting classes would not be worse off, and Condition B satisfied because at least one "in the money" class (the Primary Secured Creditor) voted in favour.
• The court examined potential "blots" and concluded the Deed of Contribution and potential Scottish law issues did not prevent sanction; remedies exist in Scotland and the Plan had a good prospect of taking effect there.
• In exercising its discretion the judge considered fairness across classes, the commercial rationale for differential treatment of landlord classes, the exclusion of employees and trade creditors from the Plan, and the practical need to implement restructuring quickly; no creditor had advanced an objection that the court could consider at trial.

Result: The court exercised its discretion to sanction the Plan under Part 26A CA 2006 (including a cross-class cram down under section 901G), finding that the Plan offered a fair allocation of the restructuring benefits in the circumstances.

The court sanctioned the restructuring Plan. The judge found that (i) the statutory requirements to convene meetings and to consider sanction were met, (ii) the "relevant alternative" was an administration with accelerated M&A, (iii) on FTI's modelling dissenting classes would be no worse off under the Plan (s901G Condition A) and the Plan had sufficient consenting classes (Condition B), and (iv) there were no material defects or unfairness warranting refusal; accordingly an order was made sanctioning the Plan.