Early ‘cram down’ insolvency cases show that more communication by UK financial experts is required

BVWire–UKIssue #35-1
February 1, 2022

More complex insolvency cases are now passing through the High Court using the tools included in the UK’s new restructuring regulation. There are creditors’ meetings 10 February for one of the most watched of these insolvency cases, Smile Telecoms Holdings Limited.

A common theme: In the initial cases, the court has considered the adequacy of disclosures made to creditors. The written judgement from the Amicus Finance scheme the court authorised last August says, “[I]t is not enough for office-holders simply to state their conclusions as to the estimated outcome and implicitly to invite creditors to assume that because they are professionals that they will have got it right.”

These court administrators will be increasingly reliant on the opinions of their financial experts to support disclosure expectations, the Amicus decision showed. This plan intended to rescue the company from £32 million of claims primarily by reducing the rights of the senior secured creditor class. Since it was the first case proposed under the new regulations, many features like the cram down of dissenting classes and the creditor disclosure requirements were immediately tested. At the convening hearing, the court, for the first time, exercised its power under s. 901C(4) of the Companies Act 2006 to exclude the company’s members and all but a single class of creditors from voting on the plan.

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