In July 2022, the first mid-market restructuring plan, proposed by Houst Ltd, a property management company, was sanctioned by the High Court. The court sanctioned the plan in the face of opposition from HMRC, proving that a mid-market restructuring plan could be delivered and that, in principle, HMRC could be crammed down, despite their preferential status. This was followed at the start of 2023 by the sanctioning of the restructuring plan of GoodBox, a provider of contactless charity donation infrastructure. To date, this is the only restructuring plan proposed by a creditor of a company, with Walker Morris acting for NGI Systems and Solutions, the creditor which proposed the plan.

However, between April and May 2023, two mid-market restructuring plans were refused sanction by the court. In both Re Nasmyth Group Ltd and Re Great Annual Savings Co Ltd the companies proposed restructuring plans which sought to cram down HMRC. Unlike in Houst, HMRC made submissions in court in strong opposition.

Notwithstanding clear authority that HMRC can be crammed down, it appears that the decisions in Re Nasmyth Group Ltd and Re Great Annual Savings Co Ltd may have caused some within the market to lose confidence in restructuring plans as a useful restructuring tool in the mid-market.

Throughout 2023 and 2024, the majority of restructuring plans have involved the restructuring of high value debt obligations or significant lease portfolios. This brings us back to the comments of Mr Justice Michael Green. In the McDermott restructuring plan, the company’s professional costs incurred in delivering the plan exceeded $150 million. Mr Justice Green was scathing of the level of costs incurred and sought to reiterate that restructuring plans were intended to support businesses at every level of the economy.

Will the mid-market restructuring plan return?

As we moved through 2024, there were positive developments in the mid-market space for restructuring plans.

In May, Consort Tameside (Healthcare) Plc, an SPV which provided services to an NHS trust under a PFI contract, proposed a restructuring plan. Whilst the plan was not, in the event, pursued through to a vote of creditors, it does demonstrate the creative use of plans within the restructuring market and how unique circumstances can make the use of restructuring plans attractive.

In August, Revolution Bars Limited also had a restructuring plan sanctioned. The plan included a debt and equity restructure.

Are restructuring plans likely to become commonplace within the mid-market generally? Probably not. Often, circumstances on the ground will make a pre-pack sale or simple refinancing a more attractive proposition to stakeholders. But, restructuring plans should certainly be considered by directors, funds and advisors as a potentially powerful restructuring tool, taking into account the unique circumstances of every business. For example,

• where companies operate within heavily regulated sectors, a restructuring plan may offer a route to rescue the business whilst maintaining its existing licenses and approvals; or
• where a company is reliant on significant key contracts which have become undeliverable or underperforming division, then a restructuring plan may allow the company to continue that contractual relationship or exit that division, whilst restructuring its wider obligations in a way which makes its business viable; or
• for groups with an unsuitable debt or equity structure, a restructuring plan offers control to management and the opportunity to restructure all liabilities in a single plan document, utilising the cross-class cram cramming down certain creditors.