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

When asked to impose a restructuring plan on a dissenting class, the court must examine how the benefits preserved or generated by the plan are allocated among affected creditor groups. An interim plan may preserve a material benefit by maintaining the business as a going concern while a substantive restructuring is pursued.

The opposition of creditors who would be out of the money in the relevant alternative may carry little or no weight. Their position cannot, however, be excluded automatically from the assessment of fair allocation.

A plan has a blot where, among other things, it is unworkable or contemplates illegality or breach of an obligation. Releases of third parties must be necessary to give effect to the arrangement. That requirement ordinarily does not justify releasing the company’s own potential claims against its directors and advisers.

The Plan Company was the holding company of a group whose regulated operating subsidiary supplied water and sewerage services. The group faced acute liquidity difficulties and substantial secured debt. Its proposed plan under Part 26A of the Companies Act 2006 was intended to provide super-senior funding and extend debt maturities while a later equity-funded restructuring was pursued.

Leech J sanctioned the plan in [2025] EWHC 338 (Ch). Class B creditors, the shareholder and an intervening Member of Parliament appealed. They challenged the plan’s allocation of control and information rights, its costs and public-interest consequences, and releases granted to creditors, directors and advisers.

The principal questions were how horizontal fairness applies to an interim plan and to creditors who would be out of the money in the relevant alternative; whether the plan’s costs or public consequences constituted a blot; and whether releases of the companies’ own claims against directors and advisers were permissible.

1. Appeal dismissed subject to amendment of the releases. The judge was entitled to sanction the plan, but the releases and covenant not to sue had to exclude claims subsequently brought by a special administrator of the operating company or an insolvency office-holder of the Plan Company.

2. The judge adopted too narrow an approach in finding that an interim plan generated no restructuring surplus. The preferable inquiry concerns the benefits preserved or generated by the restructuring. Maintaining a going concern and creating an opportunity to implement a later restructuring may itself constitute such a benefit: paras [117]–[119].

3. The fact that creditors would be out of the money in the relevant alternative does not create a rigid rule excluding their treatment from horizontal fairness. Their opposition may carry little or no weight, but the court must still consider whether the plan fairly allocates its benefits among creditors whose rights are compromised. On the facts, both Class A and Class B creditors contributed to the bridge by postponing maturity: paras [126]–[156].

4. The Class A control terms were not unfair. The June Release Condition principally preserved influence which Class A creditors already possessed under the existing security arrangements. The additional information rights also did not justify refusing sanction. Any later plan would require fair and timely engagement with all stakeholders: paras [157]–[169].

5. The sanction court’s ordinary inquiry concerns fairness among creditors. It does not acquire a general responsibility to decide whether a special administration would serve customers and the public better than the plan. Under the Water Industry Act 1991, that wider responsibility rested principally with the Secretary of State and Ofwat: paras [174]–[181].

6. A blot may include a defect making a plan unworkable, illegal, ultra vires or inconsistent with an obligation owed by the company. The plan’s financing costs were not such a blot. Several headline amounts were not caused by the plan or would not have been avoided in special administration, and the judge could find that the adverse financial consequences of special administration equalled or exceeded the restructuring costs: paras [182]–[213].

7. The prospect of the later restructuring succeeding was relevant, but the court did not have to be satisfied to any particular standard that it would succeed. Nor did procedural fairness require appointment of an independent public-interest or customer advocate in the circumstances: paras [218]–[222].

8. Third-party releases are permissible where necessary to give effect to the disposition of the company’s debts and liabilities. Releases by creditors may prevent ricochet claims, but that rationale did not justify releasing the companies’ own possible claims against their directors and advisers. Those claims could become assets in a later insolvency if the substantive restructuring failed: paras [238]–[245].

1. Court of Appeal (Civil Division): In [2025] EWCA Civ 475, dismissed the appeals subject to amendment of the plan to preserve claims which might later be brought by a special administrator or insolvency office-holder.
2. High Court, Insolvency and Companies List: Leech J sanctioned the restructuring plan under Part 26A of the Companies Act 2006 in [2025] EWHC 338 (Ch).
3. High Court, convening stage: Trower J directed meetings of seven creditor classes in [2024] EWHC 3310 (Ch).