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CVAs: BPF Guidance

CVAs are a hot topic at the moment, and the British Property Federation has produced a document setting out CVA best practice to provide guidance to IPs on key issues landlords will look for in a CVA proposal.

As you may be aware, an informal protocol had developed, whereby the Nominee consulted with the BPF in advance of the distribution of the Proposal in order to identify potential issues to be addressed for the CVA to be approved.

The first step of the BPF protocol is to share a “late stage draft” of the Proposal with a member of the BPF’s Insolvency Committee. The BPF have said that they will be prepared to enter into a non-disclosure agreement as they understand that confidentiality is essential in such matters.

The second step is that the Proposal should be shared in sufficient time that they can review and suggest revisions to it where appropriate. They consider that three business days should be sufficient.

The third step is to consider the following key issues for landlords (these should be addressed in the Proposal):

  • Basis of valuation proposed for landlords’ claims (and their voting rights)
  • Basis of ‘stratification’ where different options are being offered (e.g. some stores to close, others to trade)
  • Terms to enable the landlord or tenant to terminate the lease outside any existing lease provisions
  • Compensation offered
  • Relevant antecedent transactions
  • Clawback provisions
  • Rent reviews
  • Rent repayments
  • Effect on guarantors
  • Liability for rates
  • Payments in lieu of dilapidations, and the basis for calculation
  • The ability of the landlord to terminate the CVA in the event of default
  • Explanation as to why CVA stands a better chance than any previous failures
  • Explanation as to why CVA is a better option than Administration
  • The source of funding to make the CVA financially viable
  • An explanation of why the business will be sustainable should the CVA be approved
  • The justification for any differential treatment of creditors
  • Conditions for termination of the CVA

The fourth step is to consider a separate summary of the CVA proposal which pulls together the key issues of the Proposal in one place.

Posted: 17.07.2018
Tags:  newsletter  announcement
 


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