A CVA is a powerful formal restructuring tool that can be used by a debtor company to impose a compromise on unsecured creditors who will not compromise consensually.
In 2020, the first full year of the global COVID-19 pandemic, there were fewer CVAs than the prior year, partly due to government support measures that have temporarily shielded debtors from enforcement action. However, these measures are not a permanent fix. In many cases debts have been deferred, rather than released, and have been building up on balance sheets.
As the support tapers off, we expect more businesses to require debt compromises to improve cash-flow and mend their broken balance sheets. This may result in an upswing in the use of CVAs.
This publication from CMS’ Restructuring & Insolvency team outlines the key features of the CVA process, trends in pan-pandemic-era CVAs used to compromise leasehold liabilities, and what lies ahead.
