BusinessBusiness RecoveryCVA preferrential status idea for white knights dropped

CVA preferrential status idea for white knights dropped

Government cans "super priority" proposal for lenders bankrolling Company Voluntary Arrangements

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.”

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