Latest retail CVA technology: foreign leases, business rates and turnover rents in focus

Latest retail CVA technology: foreign leases, business rates and turnover rents in focus
Mini-summary: Elaine Nolan, Kate Stephenson and Kon Asimacopoulos, partners at Kirkland & Ellis International LLP, consider the recent Paperchase and Homebase CVAs which broke new ground in compromising business rate liabilities and lease liabilities for certain non-UK properties. In addition, they look at Paperchase’s move to turnover rents under the terms of the CVA.
 
2018 proved a record year for CVAs and we expect 2019 to follow a similar trend, based on the number of engagements already underway, including the approval of Paperchase's company voluntary arrangement (CVA) on 22 March 2019. This News Analysis provides an overview of the latest technology on retail CVAs.
 
Although CVAs are able to compromise all unsecured liabilities of a company, the recent wave of CVAs has largely been focused on rent obligations. Kirkland recently advised on the first large-scale CVA to compromise business rate liabilities and lease liabilities for certain non-UK properties. The CVA also compromised certain other legacy liabilities which have been left untouched by other major CVAs. We are also advising Paperchase on the first CVA of the current cycle involving a change to turnover rents.
 
We expect additional new CVA technology to develop in response to evolving market conditions and the needs of companies and their landlords.
 
Kirkland advised Homebase on a series of firsts in its recent CVA, placing the company in a stable position to focus on its turnaround. The CVA was approved with an overwhelming majority of more than 95 percent of creditors by value. Kirkland also advised Paperchase on its CVA, which was approved on 22 March 2019.
 
The Homebase and Paperchase CVAs are at the cutting edge of developments in the evolving CVA landscape.
 
Although CVAs are able to compromise all unsecured liabilities of a company, the recent wave of CVAs has largely been focused on rent obligations. The latest wave goes beyond this, compromising business rate liabilities and lease liabilities for certain non-UK properties, and certain other legacy

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.