First mid-market restructuring plan sanctioned by High Court

The ruling, issued in favour of the joint administrators of Amicus Finance plc, followed a series of heavily contested hearings before the court. Pinsent Masons acted for the joint administrators in the case.

A restructuring plan is a new restructuring tool introduced into Part 26A of the Companies Act 2006 in June 2020 by the Corporate Insolvency and Governance Act 2020. It constitutes an "arrangement" or "compromise" between the company and its stakeholders and will result in a reduction or reshaping of the liabilities owed to those stakeholders.

The process for a restructuring plan is very similar to the well-established "scheme of arrangement" regime, with stakeholders split into classes in respect of both their treatment under the proposal and for voting purposes. However, unlike a scheme of arrangement, a restructuring plan allows for dissenting classes of stakeholders to be bound in certain circumstances. This is known as "cross-class cram-down".

In the Amicus Finance case, the joint administrators sought to use Part 26A of the Companies Act 2006 to propose a restructuring plan which compromised the claims of creditors and permitted an exit from the administration, whilst also restoring the company as a going concern, the only alternative being a liquidation of the company. It was also proposed that once they had exited office, the joint administrators would continue as plan administrators under the restructuring plan.

Amicus Finance specialised in short-term property finance and had a $600 million loan book. It had traded in administration since December 2018. The company’s secured creditors comprised of Hartford Growth (Trading) Limited, which had provided funding in the administration, and Crowdstacker Corporate Services Limited, an online peer-to-peer lending platform provider which has assisted in raising funds for the company through its peer-to-business loan platform. 

Due principally to the impact of Covid-19 and Brexit, which had a substantial impact on realisations, the joint administrators concluded that it could no longer continue in administration. Consequently, the administrators applied for the convening of meetings to vote on and for an order sanctioning a restructuring plan, which they considered, if implemented, would place creditors in a better position than if the company went into liquidation.

The restructuring plan itself compromised the claims of five classes of administration creditors: expense creditors, senior secured creditors, junior secured creditors, preferential creditors and unsecured creditors. This case was also the first time the cross-class cram-down mechanism had been used to cram-down the vote of one of the company’s secured creditors, Crowdstacker, which had fully opposed the restructuring plan, the Court having been satisfied that the dissenting class would be no worse off than in the relevant alternative, being a liquidation.

Steven Cottee of Pinsent Masons, the law firm behind Out-Law, said: “The decision in the High Court on Thursday sanctioning the Amicus Finance restructuring plan is a very significant one for the UK restructuring world. It is, after Virgin Active, only the second fully opposed cross-class cram-down decision and the first involving the cram-down of a secured creditor. It is also the first restructuring plan to be proposed by an administrator and illustrates that companies can be rescued as going concerns even after administration. This is good news for the corporate rescue regime in the UK.”

Serena McAllister, also of Pinsent Masons, said: “This ruling demonstrates how useful restructuring plan exits can be where administrators are working through intensive long tail collection processes, particularly in the financial services sector. The decision also importantly sets the path for more restructuring plans to be sanctioned in the mid-market and shows that despite initial reservations within the restructuring community that they can actually be obtained cost effectively even when fully opposed.”