Powerhouse CVA dispute victory
Date: Thursday 3rd May, 2007
Author: Chris Laughton
Profile: Chris Laughton
Yesterday's judgement in the Powerhouse company voluntary arrangement (CVA) dispute has been hailed as a victory for landlords, but in reality will lead to landlords seeking greater security from tenants. Reported in The Times and Citywire, the High Court decision (Etherton J) in fact held that parent company guarantees can effectively be avoided through a CVA, provided the value of the guarantee is recognised in the proposal. In other words, guaranteed creditors must get a better deal than ordinary unsecured creditors. Whilst the landlords' advisers, Addleshaw Goddard and Lovells, are keen to emphasise the judge's ruling against "guarantee stripping", a well-crafted and balanced CVA remains a powerful tool for managing minority creditors' claims. Who do you think actually got the better deal here, the landlords or the beleaguered insolvency practitioners trying to find an equitable solution for all stakeholders? Will the commercial property market suffer, or is this another attack (like the Trident case on administrators' liability for business rates) on the proper and efficient use of insolvency procedures as rescue tools? Let us have your comments.
Keywords: 'company voluntary arrangement' landlords powerhouse
Please note that the opinions expressed in this blog represent the views of the author and not the views of Mercer & Hole.
Discussion and Comments
By Paul C on Friday 4th May, 2007
It’s not great for an IP, but it seems sort of fair to me, and given the relative scarcity of CVAs (and certainly stand-alone CVAs), I suspect this will pass many IPs by in the short term.
Of much more concern to me is the decision in Trident. I suspect the Government may well trumpet a marked reduction in administrations in months to come…whilst conveniently ignoring a resurgence in admin receiverships which are unaffected by the changes (good ole Ratford v Northavon DC).
By Chris Laughton on Friday 4th May, 2007
Paul
I don’t actually think Powerhouse is bad for IPs who use the CVA tool properly - but you’re right, it will pass many by!
As to Trident, perhaps it will encourage a few trading CVLs where there are post-Enterprise Act floating charges. . . .