A judge in London ruled that gym chain Virgin Active can wipe out the rent arrears on most of its venues and avoid future steep payments, despite the opposition of a majority of its creditors.
The decision represents a victory for tenants and a blow for landlords, with other companies now likely to seek a reduction in their debt pile using the same tool. Rent arrears have been building since March last year when non-essential businesses were forced to close or operate with restrictions due to the pandemic.
During the hearings, the company owned by South African investment company Brait and billionaire Richard Branson argued that without the plan it would go into administration; a worse outcome for most classes of creditors.
In response, the landlords – Aberdeen Standard Investments, British Land, Land Securities and a fund managed by Knight Frank Investment Management – said that the company could have tried other options, such as selling the business or some assets, to tackle the situation.
Ultimately, Judge Richard Snowden ruled that with the restructuring plan “no member of a dissenting class will be any worse off than they would be in the relevant alternative”.
Virgin Active celebrated the ruling as a fair solution that will allow the gym chain to “emerge from the crisis as a stronger business”.
Landlords, however, expressed concern about the wider implications of the ruling.
“This restructuring plan sets a dangerous precedent and demonstrates how the law is now allowing wealthy individuals and private equity backers to extract value from their businesses in good times but later claim insolvency,” wrote Melanie Leech, chief executive of British Property Federation, in an emailed statement.
While the Covid-19 pandemic has brought hardship to businesses, “it has also been cynically used as an excuse to shift onto property owners the cost of years of failings and underinvestment”, Ms Leech added.
The ruling increases the likelihood that future restructuring plans “will be run with insufficient consultation and transparency with key creditor groups”, a spokesperson for Land Securities wrote in an emailed statement.
Virgin Active is the first company to use insolvency rules approved last year which force landlords to accept losses even when fewer than three-quarters of the firm’s creditors agree. UK car park operator NCP is now seeking relief for its rental costs under the same criteria.
The gym group’s rent bill is set to reach £30 million ($42m) by the end of May, according to court documents.
Prior to the pandemic, the UK’s standard restructuring tool to deal with unsecured creditors like landlords consisted of a company voluntary arrangement, which requires approval by 75 per cent of relevant creditors.
Under the so-called “cross-class cramdown” rule, companies just need one class of creditors to support the restructuring, but still require court approval for their plans.
A government-imposed moratorium on forfeiture action, preventing landlords from taking control of the asset if the tenant fails to pay, has been in place for more than a year and is set to be lifted in June.
The Virgin Active case represents a huge victory for tenants and more companies will consider this tool now that there is more certainty about how a court will see certain approaches, according to Ian Corfield, a restructuring partner at FRP Advisory. Going forward, landlords will have to be more creative to avoid the imposition of losses by a minority of creditors.
“These are the rules, and the only way to change them is by constant challenge, constant evolution and coming up with more creative solutions,” said Mr Corfield.
FULL%20RESULTS
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Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
More from Armen Sarkissian
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
The biog
Siblings: five brothers and one sister
Education: Bachelors in Political Science at the University of Minnesota
Interests: Swimming, tennis and the gym
Favourite place: UAE
Favourite packet food on the trip: pasta primavera
What he did to pass the time during the trip: listen to audio books
Read more from Aya Iskandarani
OPINIONS ON PALESTINE & ISRAEL
The biog
Family: wife, four children, 11 grandchildren, 16 great-grandchildren
Reads: Newspapers, historical, religious books and biographies
Education: High school in Thatta, a city now in Pakistan
Regrets: Not completing college in Karachi when universities were shut down following protests by freedom fighters for the British to quit India
Happiness: Work on creative ideas, you will also need ideals to make people happy
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
'How To Build A Boat'
Jonathan Gornall, Simon & Schuster
%20Ramez%20Gab%20Min%20El%20Akher
%3Cp%3E%3Cstrong%3ECreator%3A%3C%2Fstrong%3E%20Ramez%20Galal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%3C%2Fstrong%3E%20Ramez%20Galal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStreaming%20on%3A%20%3C%2Fstrong%3EMBC%20Shahid%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E2.5%2F5%3C%2Fp%3E%0A
Scores
Rajasthan Royals 160-8 (20 ov)
Kolkata Knight Riders 163-3 (18.5 ov)
Winners
Best Men's Player of the Year: Kylian Mbappe (PSG)
Maradona Award for Best Goal Scorer of the Year: Robert Lewandowski (Bayern Munich)
TikTok Fans’ Player of the Year: Robert Lewandowski
Top Goal Scorer of All Time: Cristiano Ronaldo (Manchester United)
Best Women's Player of the Year: Alexia Putellas (Barcelona)
Best Men's Club of the Year: Chelsea
Best Women's Club of the Year: Barcelona
Best Defender of the Year: Leonardo Bonucci (Juventus/Italy)
Best Goalkeeper of the Year: Gianluigi Donnarumma (PSG/Italy)
Best Coach of the Year: Roberto Mancini (Italy)
Best National Team of the Year: Italy
Best Agent of the Year: Federico Pastorello
Best Sporting Director of the Year: Txiki Begiristain (Manchester City)
Player Career Award: Ronaldinho
Company%20profile
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The Saga Continues
Wu-Tang Clan
(36 Chambers / Entertainment One)
RESULTS
Main card
Bantamweight 56.4kg: Mehdi Eljamari (MAR) beat Abrorbek Madiminbekov (UZB), Split points decision
Super heavyweight 94 kg: Adnan Mohammad (IRN) beat Mohammed Ajaraam (MAR), Split points decision
Lightweight 60kg: Zakaria Eljamari (UAE) beat Faridoon Alik Zai (AFG), RSC round 3
Light heavyweight 81.4kg: Taha Marrouni (MAR) beat Mahmood Amin (EGY), Unanimous points decision
Light welterweight 64.5kg: Siyovush Gulmamadov (TJK) beat Nouredine Samir (UAE), Unanimous points decision
Light heavyweight 81.4kg: Ilyass Habibali (UAE) beat Haroun Baka (ALG), KO second round
