River Island and Poundland – a consolidated framework for the court’s exercise of cross class cram down discretion

 The UK retail sector faces ongoing challenges from shifts in consumer behaviour and persistent economic pressures. In this light, Part 26A of the Companies Act 2006 has become a vital mechanism for struggling companies, enabling them to undertake a holistic restructuring, effectively using one process rather than combining the Part 26 scheme technology with the CVA as had been the case prior to the introduction of the restructuring plan. 

We have seen this method used since the early days of the Part 26A plan in Virgin Active (2021), and subsequently in Lifeways, Fitness First, Prezzo, Clintons (all in 2023); Tasty Plc, Superdry, Revolution Bars Group Plc, Cineworld, Dobbies (all in 2024); and Outside Clinic, Enzen, Independent Builders Merchant Group Ltd (all in 2025). For further insights into these trends and implications for landlords, see our previous blogs on Lifeways and Cineworld. The recent cases of River Island and Poundland follow in this track. 

Going beyond the detail on what traditionally happens in landlord restructuring plans, what the judgments by Sir Alistair Norris also do (and which is the focus of this blog) is this:

• Set out a clear methodology on how the court addresses whether or not to exercise its discretion to sanction a restructuring plan (where the jurisdictional gateway tests are met) derived from the trilogy of cases: Adler, Thames Water and Petrofac;

• Deal with creditor apathy – a particular problem in retail restructuring plans affecting landlords; and

• Address the emergence of the plan benefit report. 

River Island and Poundland – the background

 River Island Holdings Limited (River Island) is the parent company of River Island clothing group. Facing a £43 million immediate liquidity shortfall, worsened by increased employment costs, River Island proposed a plan to restructure its leasehold portfolio, focus on underperforming stores, and offer tailored rent concessions to different landlord groups. 

Similarly, Poundland Limited (Poundland) a discount retailer, faced imminent cash-flow insolvency after failed diversification efforts. Its restructuring plan relied upon substantial sacrifice from former parent Pepco as part of a pre-arranged sale of the business to a new owner. This plan, too, involved reorganising its leases by categorising landlords according to store performance and granting tailored rent reductions. Creditors were offered recoveries 170% higher than estimated administration returns, along with the opportunity to participate in profit sharing. 

The consolidated framework: who doesn’t love 11 principles?

 In River Island, Sir Alastair Norris distilled the trilogy of Court of Appeal cases in Adler, Thames Water and Petrofac into a practical framework consisting of 11 principles to guide the court in its decision whether to sanctioning a plan where cross class cram down is needed. These are:

1. Fair sharing of burden and benefits: The burden and benefits of a restructuring plan should be distributed fairly among all parties whose rights are affected. 

2. Perspective of dissenting classes: The court must consider why the compromise approved by assenting classes should be imposed upon dissenting classes.

3. Burden on plan company: The plan company bears the burden of persuading the court of the fairness of the plan, even if there are no objections.

4. Relevant alternative as starting point: The starting point is the treatment of the dissenting class in the relevant alternative.

5. Pari passu expectation: In an insolvency process, the initial expectation is pari passu treatment within each insolvency class.

6. Justified differential treatment: Differential treatment within an insolvency class is permissible if justified on proper grounds. 

7. Focus on creditor interests: When assessing fairness, the court’s primary focus is on the creditor’s interests qua creditor.

8. Broader effects: When considering the sharing of the burden and the benefits the court is entitled to stand back and consider the effect of the plan on those not party to the compromises, such as excluded creditors or shareholders. 

9. Source of benefits: The court may consider what the source of the benefits is (how the value is preserved or generated by the plan).

10. Substance over form: The court looks at substance, not form; new money on terms more advantageous to the provider than would be required by a lender in the market may be a benefit conferred on the provider, not just a contribution to the costs of the plan.

11. Genuine attempt: The court will consider the evolution of the plan and will assess whether it genuinely aims to provide a fair and reasonable solution to a critical problem, rather than arbitrarily imposing compromise terms upon creditors with a view to extracting advantage in a critical situation.

The court addresses each of the principles in both River Island and Poundland. While not every principle is individually discussed at length, the framework underpins the entire structure of the judgments and justifies the court’s ultimate conclusion to sanction the plan in both cases.

The court examined the no votes

Looking in particular at the second of the 11 principles, the court was keen to understand the position of the dissenting classes. In River Island, despite the plan promising higher creditor returns than a formal insolvency (thus satisfying statutory Condition A), half the landlord classes voted against it. Similarly, in Poundland, despite creditors being offered recoveries 170% higher than estimated administration returns, a majority of creditor classes, mainly landlords, also voted against the plan. In River Island, the court noted that opposition from certain landlord classes was likely affected by “block voting” from large, sophisticated landlords such as Fraser Group and British Land, whose commercial motivations may have extended beyond their interests as landlords under the affected leases. The judge suggested that one landlord who itself was a competing retailer might favour River Island’s entry into administration. He also highlighted the “puzzling” opposition from certain classes, such as Class A landlords, who would see minimal impairment under the restructuring plan.

Similarly, in Poundland, despite extensive engagement efforts, many landlord classes and the General Creditors class voted against the plan, with low participation among General Creditors pointing to either creditor apathy or “contingent claims with no immediate exposure”. 

So you oppose the plan – but what are you doing about it?

A striking feature of both River Island and Poundland is that the significant creditor opposition at the voting stage largely evaporated by the final sanction hearing. Despite the dissenting vote the opposing creditors failed to substantively challenge the companies’ evidence on the relevant alternative and did not appear in court to argue their case at all. This left Sir Alastair Norris to “undertake the analysis unaided” in River Island and to limit himself to a “high-level” view in Poundland. 

The court was critical of British Land which sought to advance an "alternative restructuring" late in the process, proposing more favourable terms for itself rather than a comprehensive, viable plan for all creditors. Sir Alastair Norris pointedly referenced Snowden J’s dictum in Re Smile Telecom Holdings: dissentients "must stop shouting from the spectators’ seats and step up to the plate". This also shows how the restructuring plan has changed the landscape for landlords where there has always been a degree of institutional pushback in CVAs - almost as a matter of principle – for obvious reasons given the impact CVAs had on this community. It is notable that the increasing requirements in restructuring plans to need to actively oppose (as opposed to passively oppose) make “principled” objections much less impactful and are increasingly putting challengers to the test given the need to decide whether to spend real time and money on opposition. The court is very clear now that while dissent is weighed, it must be well-reasoned and, ideally, accompanied by a viable alternative to significantly sway the decision. 

The emergence of benefits reports

Both River Island and Poundland saw the deployment of expert-led benefits reports to assist fairness of allocation arguments. This emerging practice represents a strategic tool for a plan company to bolster its argument that a plan is fair and seeks to assist the court in its analysis as to whether the benefits and burden are shared fairly. 

In both cases, reports from PwC and FTI Consulting respectively were presented to provide a quantitative, “horizontal” comparison of the contributions made by each creditor class against the benefits they were projected to receive, helping the company discharge its burden of proof.

While Sir Alastair Norris approached these reports with caution, highlighting their "inherent limitations", that they pile “assumption upon hypothesis” and that they are not capable of valuing crucial intangible benefits – he nonetheless acknowledged their utility. 

The judge used the analysis as a high-level cross-check to confirm the absence of any "fundamental unfairness" and to show that the treatment of dissenting classes was not "out of line" with others. Describing the analysis in River Island as "no more than a very approximate guide," he made it clear their value lies in providing a rational basis for comparison.

Key takeaways

• The development of guiding principles: The court has set out a practical framework consolidating judicial guidance to date to guide it through the exercise of its discretion to sanction a plan against creditor dissent. 

• Not all no votes are equal: the court will not take a no vote at its face value but is prepared to examine whether a creditor has other reasons for voting against the plan and this will have some bearing on its decision making. 

• Dissent without substance is a failed strategy: Emphasising guidance from the court received early on (see our blog in Smile Telecom) the court has shown it will not be swayed by a high volume of "no" votes if that opposition is passive. Dissenting creditors must substantively challenge a plan’s core evidence in court and, ideally, propose a viable alternative; simply voting against the plan is not enough to block it – even if there are a rather large number of dissenting classes.

• The plan benefit report: While a benefits report is not a silver bullet, it is fast becoming a crucial piece of defensive evidence.