Shepherd Cox IVA Proposals
In our previous article here we gave an overview of the Shepherd Cox Directors’ IVA Proposals. In this article we had intended to analyse some of the statements made by the Directors, but we have decided to keep most of those for another day. Instead, we will just highlight that there are legal actions involving three of the hotels in the Festival Hotels Group portfolio which have not been mentioned in the IVAs. These are issues which should be put to the Trustees for clarification at the meetings on 12th January. We also draw attention to the paragraph we found which confirms our suspicion that creditors could end up with nothing from the IVA.
THE GET-OUT CLAUSE.
Here is the clause which provides the escape route for the Directors.
“For the sake of clarity, in the event of the failure of FHG [ Festival Hotels Group Ltd ] for any reason within the duration of the Arrangement, or should the declarations of dividends by FHG otherwise become impossible for any reason outside of my control, this will not be deemed an automatic default or failure of the Arrangement”.
SOS Comment: “….in the event of failure of FHG for any reason……this will not be deemed an automatic default or failure of the Arrangement”. That leaves the pathway clear for a pre-pack insolvency of FHG, the consequence of which is that the IVA would be allowed to continue despite there being no dividends to creditors and no share value at the end. The shares would be worthless and all assets would have been put beyond the reach of creditors. It also means that creditors would not be able to revert back to having a claim over any of the genuine assets which would have been available in bankruptcy.
We knew there would be a get-out clause in there somewhere.