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Powerhouse CVA dispute victory

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.



Date: 3rd May, 2007
Author: Chris Laughton


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