The eagerly awaited High Court decision in the case of Prudential Assurance Co & Others v PRG Powerhouse and Others has finally been published, providing comfort that billions of pounds will not be wiped off the value of the UK commercial property market. Or does it?
Central to the case was the interpretation of the debt owed by large electrical retailer, Powerhouse, to a group of some of the UK’s biggest landlords. The facts of the case are as follows: last year, Powerhouse got into financial difficulties. In an attempt to save the company, the directors decided to close 35 of the underperforming trading outlets, leaving 53. A company voluntary arrangement (CVA) was therefore proposed, the controversial terms of which included removing rental obligations and releasing the guarantees given by Powerhouse’s New Zealand parent company, PRG Group. The CVA was approved by those creditors that were to be paid out in full by the arrangement. Naturally, the landlords affected by the CVA objected to its terms and challenged its validity: they claimed it was an unfair attempt to strip away the parent company guarantees.
