High Court orders expedition to determine issues relating to a financial restructuring given insolvency alternative (McLaren Holdings Ltd v US Bank Trustees Ltd)

High Court orders expedition to determine issues relating to a financial restructuring given insolvency alternative (McLaren Holdings Ltd v US Bank Trustees Ltd)

The High Court has expedited a trial at which it would bedetermined whether luxury car manufacturer McLaren Group could obtain the release of certain security for the benefit of its senior noteholders, failing which a financial restructuring which was contingent on that release could not beimplemented. The court concluded that, absent determination of the proceedings within one month, McLaren Group would have no choice but to enter an insolvency process and that this justified expedition in this case. Written by Natasha Johnson and Andrew Cooke of Herbert Smith Freehills.

McLaren Holdings Ltd v US Bank Trustees Ltd [2020] EWHC 1892 (Ch)

The court also held that a senior noteholder should bejoined to the proceedings to represent the interests of the senior noteholders.

The decision provides a useful illustration of the willingness of the courts to support efforts to financially restructure a company and save it from insolvency, even where the company does not seek assistance of the court via a more commonly used restructuring jurisdiction of the court (such as its ability to sanction a scheme of arrangement). That is particularly the case where all parties to the dispute have an interest in the company’s survival and ability to meet its debts as they fall due, as demonstrated by the senior noteholders’ decision in this case not to oppose expedition. For companies and their creditors dealing with urgent liquidity crises, the court’s practical approach in this case will bewelcomed.

Background

As a result of the coronavirus (COVID-19) pandemic, McLaren fell into severe financial difficulty, to the point that it was forecast to run out of money by 17 July 2020. If McLaren ran out of money, the court concluded ‘that will bethat for the company’.

In order to raise new money, McLaren proposed a restructuring of its senior notes including the release of certain security which was granted for the benefit of senior noteholders so that the secured assets could instead beused to secure

Subscription Form

Already a subscriber? Login
RELX (UK) Limited, trading as LexisNexis, and our LexisNexis Legal & Professional group companies will contact you to confirm your email address. You can manage your communication preferences via our Preference Centre. You can learn more about how we handle your personal data and your rights by reviewing our  Privacy Policy.

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login