Vol 22 (2025) - Issue 3

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Thames Water: Court of Appeal Delivers Judgment Rejecting Challenges to Restructuring Plan

Synopsis
The English Court of Appeal last month handed down its judgment rejecting the multiple appeals to the restructuring plan of Thames Water, which the High Court approved in February.
Approval of the plan was appealed by:
– the ad hoc group of Class B creditors (who proposed a competing restructuring plan, which ultimately did not proceed);
– a Member of Parliament, Charlie Maynard MP, representing the public interest and the interest of customers; and
– Thames Water Ltd (TWL), the subordinated creditor (which is also the plan company's immediate shareholder).

The Court of Appeal held as follows.
– Discretion: The Court of Appeal upheld the High Court's exercise of discretion irrespective of whether or not the Class B creditors would be out of the money in the relevant alternative. It was therefore unnecessary to resolve questions raised by the Class B AHG's appeal against the judge's findings on valuation. There was no relevant unfairness in Class A Creditors preserving – via the June Release Condition – their practical influence over a future restructuring.
– Caution on applying 'guidance' from previous cases: Courts should confine themselves to the facts of the relevant case and must exercise caution
in applying guidance in previous cases, especially where the nature and purpose of the relevant restructuring plan was fundamentally different.
– Benefit preserved or generated by the plan: Here, this benefit consisted of the intangible benefit of preserving the Thames Water operating company
as a going concern in the short to medium term to enable it to pursue the opportunity of preserving or obtaining further value within a second, holistic restructuring (RP2).
– Treatment of 'out-of-the-money' stakeholders: It will not necessarily always be right to conclude that the fact that a dissenting class would be out of the money in the relevant alternative is a sufficient justification to exclude them from whatever benefits the plan preserves or generates. The Court can take account of the treatment of out of the money creditors in considering the fair distribution of the benefits of a plan.
– Public interest issues: The inability of creditors to agree does not mean the Court should conduct a wider enquiry as to whether the plan or a special administration would better serve the public interest.
– For further background, see our Alert on the first instance approval of the plan and the headline terms of the plan in the Annex.