We have been keeping you informed of progress of the challenge to the Powerhouse CVA by a number of high profile landlords. The High Court ruled today,1 May 2007 that the CVA proposed was fundamentally flawed because it "unfairly prejudiced" rights of those landlords against Powerhouse’s solvent parent company, the PRG Group which had acted as guarantor to the Powerhouse leases. It was part of the CVA proposal that the guarantor be released.
Landlords had been fearing a judgment in favour of Powerhouse because of the adverse affect such "guarantee stripping" would have on portfolio valuation. The judgment allows landlords to breath a collective sigh of relief – this time. Now it is over to the Insolvency Practitioners to come up with another ingenious way of reducing liabilities.
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We reported in June last year on the challenge brought by landlords to the terms of a company voluntary arrangement (CVA) which had been making headlines in the property press. The Powerhouse case is a challenge by a number of high profile landlords to the terms of Powerhouse’s CVA which proposed that Powerhouse continued to trade profitable stores, having closed its loss making stores. All creditors are to be paid in full save for landlords of the closed stores. Additional, and more significantly, the CVA sought to release the guarantees given by Powerhouse’s parent company, Pacific Retail Group.
As promised we continued to follow the progress of the Powerhouse CVA challenge. To update you, the High Court has now ordered a hearing to decide the case due to start on 21 March 2007.
We will report to you in more detail once the outcome of the hearing is known.
For details of our previous law-now on this topic please click here.
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The original publication date for this article was 01/05/2007.