February 28, 2023
On February 22, the English High Court sanctioned restructuring plans under Part 26A of the Companies Act 2006 (CA 2006) of seven companies within the Lifeways Group – the largest provider of supported living services for adults with complex health needs in the UK.
The case is notable for being the first successful use of a restructuring plan by a UK healthcare regulated business. Following the sanction order, the Lifeways Group was able to complete its restructuring transaction with its secured lenders on February 24, which involved a c.£100 million haircut of its senior secured debt, the provision of £15 million new super senior money and the consensual transfer of the Group’s ownership from OMERS (the Ontario Municipal Employees Retirement System) to the Group’s lenders.
The Group’s services are regulated by the Care Quality Commission (“CQC”) in England, the Care Inspectorate in Scotland, and the Care Inspectorate Wales. The CQC has statutory powers to monitor the financial sustainability of adult social care providers within the Market Oversight scheme and provide an early warning to local authorities if there is a risk that a provider might enter into a formal insolvency process. The Group and Willkie worked closely with the CQC and its advisers throughout the restructuring transaction to ensure the regulator was apprised throughout the process. The successful restructuring allows the Group (which employs around 10,000 people) to avoid a formal insolvency process and enables it to continue delivering specialist care services to some 4,200 vulnerable adults across the country.
The decision crystalizes the English Court’s power to exercise a cross-class cramdown on creditor classes who dissent, abstain or fail to attend the creditor meetings, providing welcome confirmation that a restructuring plan cannot be defeated by classes of creditors who refuse to vote. Compromised creditors included landlords, the Group’s former professional advisers and former members of its senior management. The Court also provided helpful guidance on when shareholders are not affected by a restructuring plan and do not need to be summoned to vote on it.
Following this successful outcome for the Lifeways Group, the UK restructuring industry could see an increased use of restructuring plans for companies in the regulated healthcare sector, which has experienced significant financial and staffing pressures in the aftermath of the COVID-19 pandemic and the current high inflationary/high energy price environment.
The Willkie team was led by partner Graham Lane and included partners Gavin Gordon, Komal Raina and Jane Scobie, and associates Alexander Roy, Matteo Clarkson-Maciel, Jason Taylor, John Lambillion, Julian Grant, Ashley Jamali, Daniel Pront and Ethan Douglas.
The case is notable for being the first successful use of a restructuring plan by a UK healthcare regulated business. Following the sanction order, the Lifeways Group was able to complete its restructuring transaction with its secured lenders on February 24, which involved a c.£100 million haircut of its senior secured debt, the provision of £15 million new super senior money and the consensual transfer of the Group’s ownership from OMERS (the Ontario Municipal Employees Retirement System) to the Group’s lenders.
The Group’s services are regulated by the Care Quality Commission (“CQC”) in England, the Care Inspectorate in Scotland, and the Care Inspectorate Wales. The CQC has statutory powers to monitor the financial sustainability of adult social care providers within the Market Oversight scheme and provide an early warning to local authorities if there is a risk that a provider might enter into a formal insolvency process. The Group and Willkie worked closely with the CQC and its advisers throughout the restructuring transaction to ensure the regulator was apprised throughout the process. The successful restructuring allows the Group (which employs around 10,000 people) to avoid a formal insolvency process and enables it to continue delivering specialist care services to some 4,200 vulnerable adults across the country.
The decision crystalizes the English Court’s power to exercise a cross-class cramdown on creditor classes who dissent, abstain or fail to attend the creditor meetings, providing welcome confirmation that a restructuring plan cannot be defeated by classes of creditors who refuse to vote. Compromised creditors included landlords, the Group’s former professional advisers and former members of its senior management. The Court also provided helpful guidance on when shareholders are not affected by a restructuring plan and do not need to be summoned to vote on it.
Following this successful outcome for the Lifeways Group, the UK restructuring industry could see an increased use of restructuring plans for companies in the regulated healthcare sector, which has experienced significant financial and staffing pressures in the aftermath of the COVID-19 pandemic and the current high inflationary/high energy price environment.
The Willkie team was led by partner Graham Lane and included partners Gavin Gordon, Komal Raina and Jane Scobie, and associates Alexander Roy, Matteo Clarkson-Maciel, Jason Taylor, John Lambillion, Julian Grant, Ashley Jamali, Daniel Pront and Ethan Douglas.
