contingent claims (e.g., those of
former tenants and guarantors),
but with JJB still obligated to pay
business rates for these stores.
• The right of those landlords to
assert claims against a £ 10 million
fund, with payments to be made
in two installments, one in late
2009 and the other in early 2010.
• An agreement on lease terms for the
company’s remaining 250 open retail
stores that allowed the company to
pay rent on a monthly rather than
a quarterly basis for a 12-month
period from the next quarter date.
• No compromise to the claims
of any other creditors.
The Focus Do It All, Discover Leisure,
and Blacks CVAs were approved next.
Each proposed a lump sum payment
from a parent company or investor
or further funding from a financier
contingent upon approval of the CVA
proposal. That sum would be applied
to make a single lump sum payment
to the affected landlords in return for a
complete release of both the tenants’
and the guarantor’s liabilities.
The amount payable to each landlord
was to be calculated according to a
fixed formula that would take into
account rents, unexpired term,
rateable value, profit, and wear and
tear. The method of termination of
a lease was flexible, because some
landlords preferred their leases to
continue to avoid rates liabilities, while
some preferred to surrender leases
to preserve existing subtenancies.
The Miss Sixty case provided an
example of what constitutes an
unacceptable CVA proposal and
serves as a reminder of an insolvency
practitioner's duties when drafting
one. The case also helpfully outlined
what constitutes unfair prejudice to an
affected landlord in a CVA proposal.
In Miss Sixty, the company proposed
a CVA to extricate itself from only two
leases in its portfolio. The payment
offered to the affected landlords did not
reflect the market value of the landlords’
claims, particularly when the parent
company, as guarantor, remained able to
meet its obligations under its guaranty.
The court was highly critical of the
terms of the proposal and the conduct
of the insolvency practitioners acting
for the company. The court said
that the practitioners had allowed
their judgment to become clouded
by the commercial wishes of the
parent company, which sought a
release of its liabilities as cheaply as
possible, at the expense of their duties
to all the creditors. Consequently,
the proposal failed following a legal
challenge by the affected landlords. 2
The most recent large-scale retail
CVAs to be proposed were by the
nursery retailer Mamas and Papas and
the clothing retailers Austin Reed/
Country Casuals. In each of these
CVAs, landlords were asked to agree to
a reduction in rent at certain of their
UK sites. Both of these proposals were
accepted by creditors. Thus, a reduction
of payments due to landlords continues
to be a key focus in retail CVAs.
The Use of Administration
When a company's business cannot
Apply and learn more at
Become a CTP or CTA
Showcase your knowledge, integrity, and experience
in the corporate restructuring profession by earning
your Certified Turnaround Professional (CTP) or
Certified Turnaround Analyst (CTA) designation.