Restructuring plans round-up: key takeaways from Chandlers, River Island, Poundland, and Madagascar Oil

Last year saw several important decisions relating to restructuring plans, including Petrofac (see our Law-Now: Saipem judgment: fair benefit sharing for all creditors) and Waldorf (see our Law-Now: Waldorf Plan Rejected: Court stresses fairness and good faith). 

Following the introduction of the new Practice Statement on how restructuring plans are to be run (see our Law-Now: A time for change in restructuring plan case management), we round-up some other key decisions in this highly active area:

1. Chandlers (Turbo Group), Re
2. Madagascar Oil Limited, Re
3. River Island Holdings Limited, Re
4. Poundland Limited, Re

Why these cases matter

Across retail, trade distribution and energy, the Court has continued to refine how it approaches sanctioning Part 26A plans (“restructuring plans”), focusing on:

• identifying a realistic “relevant alternative”;
• applying the “no worse off” jurisdictional test; and,
• critically, exercising discretion on fairness, including the fair allocation of plan benefits and burdens and the treatment of dissenting classes.

The themes in Chandlers, Madagascar Oil, River Island and Poundland, show how the Court of Appeal’s decisions in Adler, Thames Water and Petrofac have shaped the Court’s approach to restructuring plans, and underscore the fairness principles emphasised in Petrofac and the Court’s refusal to sanction in Waldorf.  

Plan companies should expect close scrutiny of horizontal fairness, new money terms, engagement with creditors, and the rationale for any differential treatment across creditor groups; they can no longer simply ignore out of the money creditors.

Chandlers (Turbo Group): multi‑company plans and benefit allocation

In Chandlers, the Court sanctioned 13 inter‑conditional plans, across a builders’ merchants group facing imminent cash exhaustion, compromising secured term loans, various landlord classes (A, B1–B2, C1–C2), business rates and general unsecured creditors, and delivering up to £20 million of new money (for which no charge was to be made nor any benefit separately sought).

With numerous classes and many “deemed dissent” outcomes due to non‑attendance, the Court nonetheless found both statutory gateways met:

1. The “no worse off test”:
   • The Court accepted evidence demonstrating that Unsecured Plan Creditors would be c.175% better off than the relevant alternatives: administration or liquidation;
   • Although each class of lease was to be treated differently (with some landlords doing better than others), impaired landlords could terminate if they wished and would benefit from compromised liability payments which would exceed the dividends payable in the relevant alternatives.
   • For Business Rates Creditors and General Unsecured Creditors, again, the compromised liability payments would exceed the dividend payable in the relevant alternatives.
2. Each plan had been approved by the requisite statutory majority of at least one in the money class – all 13 of the plans were approved by the Secured Plan Creditors.

The Court then undertook a fairness review, distilling four fairness questions aligned with Adler, Thames Water, and Petrofac. On the facts, each question was satisfied:

1. Broad equality within the same ranking (or justification for differential treatment) – The Court considered the differential treatment of creditors (including the ranking of landlords and the exclusion of certain creditors) to be fair and legitimate.
2. Proper justification for any special benefits/new money returns – the plans did not include any special benefits/new money returns.
3. Evidence of reasonable engagement with creditors and alternative proposals – there was clear evidence of this: town hall meetings, video calls etc., and the prompt answering of questions.
4. Overall fair allocation of benefits between the different groups of creditors – The Court accepted that Unsecured Plan Creditors would receive a good deal in comparison to the Secured Plan Creditors and, therefore, the allocation of benefits was entirely fair.

Practical takeaway: in multi‑entity plans with many classes, careful articulation of ranking, consistent treatment of creditors, and a transparent benefit‑sharing analysis can support a finding that a plan is “fair” even where many classes are formally dissenting for want of turnout.

Madagascar Oil: contested fairness, new money risk and third‑party releases

Madagascar Oil (“MOL”) presented a two‑creditor plan in a complex cross‑border oilfield restart. 

The two creditors were BMK Resources Limited (“BMK”) and Outrider Master Fund LP (“Outrider”) (itself in liquidation), the remaining lenders under a group Facility Agreement guaranteed by MOL and MOSA.  In addition, BMK held a separate intercompany loan with MOL and MOSA and owned 100% of the shares in MOL ((which in turn was the 99.8% shareholder of Madagascar Oil S.A. (“MOSA”) (BMK held the balance of shares, directly)).

BMK voted in favour; Outrider voted against. The Court sanctioned the plan.

It was common ground that the relevant alternative would be liquidation.  However, there was a dispute as to the form of liquidation. 

The Court rejected Outrider’s shifting proposals on the relevant alternatives. It found Outrider’s proposals for bringing investment into the oilfield to be unclear and not credibly executable, and that its suggestion that it would resort to a liquidation of MOSA to be value‑destructive, given it risked terminating the profit-sharing agreement that had been entered into with the Madagascan Government’s natural resources agency.

The Court considered the most likely relevant alternative to be MOL’s liquidation with BMK purchasing MOSA shares, yielding only a small dividend for Outrider.  Therefore, Outrider was not worse off under the plan.

When considering “fairness”, the judge accepted that, on the evidence:

1. The business plan, underlying the plan, and production economics, if there was an operational restart of the oilfields, were realistic.
2. BMK’s new money (USD7.5 million with an additional uncommitted facility of up to USD12.5 million) and its operational capabilities were critical.
3. The returns structure gave Outrider a fair share of the realistic surplus in priority to BMK’s equity upside.
4. Broader fairness was not defeated by the level of interest payable on the new money or the tax‑driven retention of intercompany debt, neither of which had been properly put in issue.

The Court also approved targeted third‑party releases (including of guarantees) as necessary to give effect to the plan and avoid destabilisation via ricochet claims, consistently with Thames and subsequent authorities.

Finally, the Court found Outrider was unreasonably holding out for a better deal given the time‑sensitive operational risks and its limited ability to credibly fund an alternative.

Practical takeaway: Fairness can be achieved where the objecting creditor gets a fair share of any future profits before others benefit, and any releases of third-party claims are limited and properly explained. Anyone objecting must clearly set out and support their objections with evidence, especially after Petrofac.

River Island: retail lease rationalisation and principled cram-down

The High Court sanctioned River Island’s plan aimed at addressing significant shortfalls in liquidity, refinancing with rescue funding, and rationalising its extensive UK leasehold estate.

Landlords were split into classes (A, B1–B4, C1–C2) with varying rent reductions or holidays for a 36‑month concession period, other property costs would continue to be paid, and each of the compromised landlords was to be granted the right to serve a 28 day notice to vacate (within 30 days of the effective date).

A creditor pot, funded by shareholders, was to deliver 200% of what had been estimated as the alternative return to creditors of an administration and this was in conjunction with a five‑year profit share (subject to a performance target).

The Court accepted administration as the relevant alternative.  It then exercised its discretion to approve a cram-down of the dissenting landlord classes.

Two aspects were pivotal.

First, the plan matched what landlords would likely recover for rent and property costs in a hypothetical administration trade‑out, then added a guaranteed uplift and further upside linked to performance.

Second, the Court adopted and applied post‑Adler and Petrofac principles including: considering whether there had been a fair sharing of burdens and benefits; assessing the plan from the perspective of the dissenting classes; noting that the burden of persuading the Court lies with the plan company (and was met); considering whether any differential treatment is fair on the basis of a clear, evidenced reason for doing so.

The Court also considered the voting patterns across landlord classes but concluded that, on the evidence, they did not alter its fairness assessment given the plan’s structure and outcomes.

Practical takeaway: setting out a clear class structure, providing a transparent comparison to the relevant alternative (here administration), providing profit sharing (where possible) can, collectively, support “fairness” and can assist in enabling cross-class cram‑down where necessary.

Poundland: sale-driven turnaround, clear landlord differentiation, and fairness considerations

Poundland proposed its plan against imminent cash-flow insolvency, and alongside a competitive sale that delivered new ownership, working capital, and turnaround support. The prior owner sought to support the transition to the new owner by subordinating its own financial interests and continuing its exposure to Poundland.

The Court treated administration focused on asset realisation as the realistic alternative, given the investment required, the level of distress, and the tight timetable.

The leasehold estate was differentiated on a clear, evidence-based basis. Landlords were grouped into classes A, B1-B5, C1-C2, plus a separate distribution centre (DC) class. Property costs continued to be paid.

For sites kept open, rent was adjusted (or temporarily reduced to nil) on a tiered basis during a 36-month concession period, coupled either with a right for landlords to give notice to vacate or the granting of a rolling break (for certain leases, Poundland was to gain a right to serve an exit notice following the expiry of the rent concession period).

The structure reflected what landlords were likely to receive in a notional administration trade-out and then added a guaranteed uplift and a share in any future upside.  Therefore, the plan delivered a greater and earlier outcome than the relevant alternative, alongside participation in a profit-sharing mechanism. The Court found the “no worse off” test was met.

When considering “fairness” and the exercise of its discretion, the Court noted, amongst other things:

• That although several landlord classes voted against the plan, no reasoned opposition or coherent alternatives were put forward at the hearing. The judge made the point of noting that “[w]hat [a] judge cannot be presented with is a jumble of incoherent requests for different treatment”.
• The plan company’s substantial attempts to engage with creditors.
• The subordination of the prior owner’s financial interests to preserve the business and transfer it to new owners rather than liquidate.
• That the differential treatment within the landlord class had an established and rational basis.

Practical takeaway: The Court may impose a plan on dissenting landlords if it delivers a greater, earlier, and more certain return than the relevant alternative and where there is a transparent sale process, a subordination of the original owner’s interests, and a rational basis for differential treatment of creditors.

Conclusion – What’s next

With Petrofac and Waldorf now settled, the previously anticipated guidance from the Supreme Court, on fairness and sanction, will not materialise from those cases.  In the near term, therefore, the Court of Appeal’s existing decisions and their application by first-instance judges, alongside the new Practice Statement, will continue to govern the shape of future plans.