CVA preferrential status idea for white knights dropped

Government insolvency chiefs have shelved plans to allow emergency funders to leapfrog other creditors when getting repaid.

The idea of "super priority" status for lenders bankrolling Company Voluntary Arrangements was floated in a consultation earlier this year, but the option was dropped on the strength of the responses received.

More than fifty businesses, individuals, and representative bodies responded to the consultation, which also suggested other ambitious measures the government hoped would spur lending.

In a ministerial statement, the government said: "In relation to rescue finance, the views of respondents were more divided. A number suggested that in practice the availability of new finance for companies seeking to restructure was less of an issue than had been indicated, and that the need for legislative change was not apparent.

"Stakeholders also recognised the need to balance the benefits of possible legislative changes against some of the risks, particularly if changes had a negative impact on the behaviour of lending institutions towards businesses in general.

"Having considered the consultation responses on this issue, the Government has decided that it will not for the moment be taking forward the finance-related proposals.

We will however continue to work with stakeholders to monitor the position going forward."

The proposals included extending a Chapter 11-style moratorium against creditor action to medium and larger-sized companies so they could also benefit from a "breathing space" from their debts.

After a positive response, these plans are still on the cards.

The moratoria proposals were broadly welcomed," the government said. " Respondents made a number of helpful comments and suggestions as to how the potential benefits could be maximised, whilst minimising the risks to creditors.

"The Insolvency Service will be taking forward more detailed development of the relevant proposals over the coming months, building on feedback received from the consultation."