Kington S.À.R.L. & Ors v Thames Water Utilities Holdings Limited & Anor

The Court of Appeal dismissed the appeals against Leech J’s sanction of a restructuring plan under Part 26A of the Companies Act 2006, subject to a limited amendment of the Plan to carve out from wide third‑party releases claims that might subsequently be brought by a special administrator of TWUL or an insolvency office‑holder of the Plan Company. The court applied the Part 26A statutory framework including the cross‑class cram‑down provisions in s.901G, and treated the relevant alternative as a special administration of the regulated operating company. Key factual and legal issues were valuation (for the no worse off test), the rights afforded to Class A creditors (notably the June Release Condition and information/facilitation rights) and the width and necessity of releases. The court upheld the judge’s factual findings and exercise of discretion: the June Release Condition and information provisions did not render the Plan unfair, the Plan was a limited interim bridge to a fuller restructuring (RP2), and the releases were generally justified but required a carve‑out to protect potential claims by future insolvency office‑holders.

This appeal concerned the sanction under Part 26A of the Companies Act 2006 of a restructuring plan proposed by Thames Water Utilities Holdings Limited, the holding company of the Thames Water group, to provide a temporary bridge to enable a further recapitalisation plan (RP2) founded on an equity raise. The High Court (Leech J) had sanctioned the Plan. The principal contesting parties were holders of Class B debt, the parent company Thames Water Limited, and an intervening Member of Parliament concerned with the public interest.

Background and nature of the application:

• The Plan sought to extend maturities of Class A, Class B and subordinated debt and to create a Super Senior Funding facility of headline £1.5bn (with an option for a further £1.5bn) to buy time for RP2. The Plan Company applied for sanction under Part 26A. The court treated the relevant alternative as likely to be a special administration of the regulated operating company, TWUL.

Issues framed by the court:

• Whether the statutory conditions in Part 26A and the cross‑class cram‑down requirements (s.901G) were satisfied, including the "no worse off" comparison with the relevant alternative;
• Whether a horizontal fairness inquiry required rejection of the Plan because of differential non‑financial rights given to Class A creditors – principally the June Release Condition and enhanced information/facilitation rights;
• Whether the Plan contained any "blot" (legal or other defect) such as unlawful releases or obligations contrary to public interest or regulatory duties; and
• Whether the costs of the Plan and Super Senior Funding justified refusal of sanction in favour of a special administration on public interest grounds.

Reasoning and disposition:

• The court accepted the High Court’s conclusion that the relevant alternative was a special administration and that urgency required the interim bridge provided by the Plan. It accepted the judge’s valuation approach for the no worse off assessment but noted the appeal did not require re‑determination of valuation as the judge’s discretionary assessment stood.
• The June Release Condition was characterised as the commercial quid pro quo for waivers the Class A creditors were asked to give; it did not confer materially novel or unfair veto rights beyond existing creditor leverage under the security documents and was not a reason for refusing sanction.
• Information and facilitation rights were adjusted by the judge (and further amended as part of the appellate disposition) to ensure parity and adequate engagement; the court found no unfairness sufficient to refuse sanction.
• On public interest and cost objections, the court held the matters are primarily for the regulators (Ofwat and the Secretary of State) and that the judge did not err in concluding the Plan’s costs did not constitute a blot or justify refusing sanction; the judge’s assessment that RP2 could reasonably succeed was enough to permit the interim Plan.
• The court required a limited amendment to the Plan: carve‑outs from the wide releases so that claims by a special administrator of TWUL or insolvency office‑holder of the Plan Company would not be released.

Outcome: appeal dismissed (subject to the specified amendment to releases).

Appeal dismissed, subject to an amendment to the Plan to limit the releases. The Court held that Leech J did not err in law or principle in sanctioning the interim restructuring plan under Part 26A: the relevant alternative was a special administration; the judge’s valuation and no worse off analysis and his exercise of discretion as to fairness and alleged blots were within range; the Class A control features did not render the Plan unfair; however, wide releases should be narrowed to preserve claims that might be brought by a special administrator or insolvency office‑holder.

Appeal from the High Court (Chancery/Companies & Insolvency list), Leech J, [2025] EWHC 338 (Ch). Permission and hearing in the Court of Appeal resulted in dismissal of the appeal with the limited amendment to the Plan (this judgment) dated 15 April 2025, [2025] EWCA Civ 475.