The Corbin & King group operates a number of restaurants, including the Wolseley and the Delaunay.
The group's parent company ("Topco") had been provided with working capital by the secured creditor, an associate company of Topco's majority shareholder. A number of group companies (the "Operating Companies") each guaranteed repayment of the Debt. Topco had not repaid the facility upon its maturity. The secured creditor demanded payment by Topco of c.£34m (the "Debt") in January 2022.
An offer was received from a third party investment fund ("Knighthead") for the acquisition of debt and equity in Topco for a sum equal to the total amount of the Debt. This initial offer by Knighthead was rejected.
Moratoria were considered necessary to protect the Operating Companies given their exposure pursuant to the guarantees they had each granted in respect of the Debt.
The Operating Companies were otherwise able to pay their ordinary trading debts as they fell due. The Moratoria would allow for a solvent restructuring of the group finances and ensure that the Operating Companies avoided administration. Benji Dymant and Rob Harding of Teneo Financial Advisory were appointed as joint monitors of the Operating Companies on 20 January 2022. In accordance with Part A1, the monitors provided a statement that, in their view, it was likely that the proposed Moratoria would result in the rescue of the companies as going concerns.
One of the perceived limitations preventing the wider use of the Moratorium provisions has been the carve out of certain types of debts from the payment holiday provisions. Generally, debts that have fallen due before the Moratorium, or that fall due during the Moratorium, are subject to the payment holiday during the Moratorium. However, there are several crucial carve outs, including but not limited to:
- amounts in respect of goods or services supplied during the Moratorium;
- amounts in respect of rent for the period during the Moratorium; and
- debts or other liabilities arising under a contract or other instrument involving financial services,
together the "Excluded Debts".
The monitors of a Moratorium are required to monitor the ability of the company to pay its Excluded Debts. If, at any time during the Moratorium, the monitor considers that the company is unable to pay such debts, or that the company is unlikely to be rescued as a going concern, they have a duty to terminate the Moratorium.
The secured creditor demanded payment of the Debt pursuant to the guarantees and each of the Operating Companies fell liable to pay the Debt.
Administrators were appointed in respect of Topco on 25 January 2022. The joint administrators received a further offer from Knighthead for the acquisition of Topco's direct and indirect interests in the Operating Companies for consideration at least equal to the Debt plus any accrued and unpaid interest. Knighthead indicated that they were prepared to work to a tight timetable in order to complete the sale. However, in line with their statutory duties, the joint administrators were under an obligation to achieve the best price reasonably obtainable in the circumstances and were required to run a full marketing process prior to completing any sale.
On 28 January 2022, the secured creditor applied to court to have the Moratoria terminated. They argued that the Operating Companies no longer met the key criteria for the Moratoria, namely: that the Debt was an Excluded Debt; that the Debt was due and payable by the Operating Companies; that the monitors should have concluded that the Operating Companies could not pay that Debt and should, therefore, have brought the Moratoria to an end; and that their failure to do so in those circumstances had unfairly harmed their interests.