This case concerned a landlord restructuring plan in relation to the WHSmith retail business. The plan was amended after the convening hearing following objections from creditor objections. As certain classes of creditors had voted against it, the court would be required to exercise its cross-class cram down power. The relevant alternative was administration.
The judge referred with favour to the “helpful checklist” provided in River Island and applied in Poundland, specifically:
The development and evolution of the plan.
The contributions made by and the source and application of the benefits to plan creditors.
The sufficiency of any justification from departing from pari passu treatment of creditors.
Relevant continuing objects to the plan.
The prospect of the plan attaining its stated objective.
The judge made the following points among others:
The differential treatment of the different classes of landlord creditors was justified.
The plan entailed the retention of equity in full by the ultimate shareholder. The judge held that this was justified in view, inter alia, of the following factors:
New money was being provided by the existing equity.
Undertakings were being given that the balance of any profits not used to pay the Excess Cumulative EBITDA Entitlement (which was itself greater than the usual % amounts seen in these cases) but would be largely used to renovate stores, service debt, pay taxes and meet other operational costs. Furthermore, there was a prohibition on shareholder distributions during the Rent Concession Period. This was not therefore a case in which the shareholder would receive a windfall from being allowed to retain equity.
There was some general force in the argument that it would be impracticable for a very large number of landlords, suppliers and local authorities to be granted illiquid equity in an unlisted company.
The judge’s instinct was that this had all the hallmarks of an adventurous equity play with the potential upside being greater than the £3m upper limit estimated in the Allocation of Benefits Report but with very considerable execution risk.
The judge ultimately concluded that where the jurisdictional conditions were met, the relevant alternative had been robustly identified, and the evidence showed a fair balance had been struck, the court would require more than a lingering sense of discomfort to refuse sanction. A concrete reason would be needed to justify withholding approval.
The judge accordingly sanctioned the plan.
In re TG Jones [2026] EWHC 2079 (Ch), Chancery Division
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