Amicus Finance Plc ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 09 August 2021 |
| Neutral Citation | [2021] EWHC 2255 (Ch) |
| Docket Number | Case No: CR-2018-011034 |
| Court | Chancery Division |
[2021] EWHC 2255 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Justice Snowden
Case No: CR-2018-011034
Marcus Haywood (instructed by Pinsent Masons LLP) for Amicus Finance plc
Andrew Mace (instructed by Shakespeare Martineau LLP) for Crowdstacker Corporate Services Limited
William Willson (instructed by Brown Rudnick LLP) for HGTL Securitisation Company Limited and the Hartford Entities
Hearing dates: 2, 5 and 8 – 9 July 2021
Approved Judgment
Introduction
This is an application brought by administrators on behalf of Amicus Finance plc (“Amicus”), a company which has been in administration since 20 December 2018. The application seeks an order pursuant to section 901C of the Companies Act 2006 (the “CA 2006”) convening meetings (the “Plan Meetings”) of creditors (the “Plan Creditors”) for the purpose of considering and, if thought fit, approving a restructuring plan in respect of Amicus (the “Restructuring Plan”). Amicus appeared by Mr. Haywood.
The hearing before me was the second convening hearing in connection with the Restructuring Plan. On 10 June 2021, Trower J adjourned the first hearing in light of certain objections raised by Crowdstacker Corporate Services Limited (“Crowdstacker”). The parties filed updated evidence and Amicus made amendments to certain terms of the Restructuring Plan and the Explanatory Statement which accompanies it, including to address observations made, and indications given, by Trower J.
At the adjourned convening hearing, Crowdstacker maintained its objections and appeared before me by counsel (Mr. Mace) to make submissions in opposition to the Restructuring Plan generally and, relevantly for present purposes, to the adequacy of the Explanatory Statement and the proposed composition of voting classes. Certain supporting creditors also appeared before me by counsel (Mr Willson), namely, HGTL Securitisation Company Limited (“HGTL Securitisation”) and certain entities known as the Hartford Entities.
On 9 July 2021, I made an Order convening Plan Meetings and I indicated to the parties that my more detailed written reasons would follow. This judgment sets out those reasons. I also deal with the question of costs on the basis of written submissions filed by the parties.
Background to Amicus
Amicus was incorporated in England and Wales on 19 August 2009. Its core business was the provision of short-term property finance, together with other forms of secured corporate and development finance.
The majority of loans made by Amicus were funded through a trust structure known as “Amicus Mortgage Trust” (“AMT”), which operated by enabling a variety of funding vehicles (the “Funders”) to fund loans on terms whereby the Funders retained the beneficial interest in the loan and Amicus held legal title to the loan. Amicus would earn fees for originating the loans and servicing them (e.g. by collecting repayments). Amicus also generated income by funding loans on its balance sheet as an acceding Funder in the AMT in its own right.
In 2018, Amicus began to experience financial difficulties. On 20 December 2018, Mark Fry, Kirstie Provan and Jamie Taylor of Begbies Traynor were appointed as administrators (the “Administrators”) over the company, with responsibility for the conduct of its business, property and affairs.
Two directors of Amicus remain in post, namely, Elissa Von Broembsen-Kluever (appointed on 3 October 2017) and Steven Clark (appointed on 19 August 2009). The shareholders of Amicus are: (i) Amicus Investment Holdings Limited (85%); (ii) Omni Partners LLP (“Omni Partners) (7.5%); and (iii) Keith Aldridge (7.5%). Omni Partners is an investment management company of which Mr Clark is a director. Mr Clark is also a director of Amicus Investment Holdings Limited.
The Administration of Amicus
The Administrators' proposals for the conduct of the administration required them to perform their functions with the objective of achieving a better result for the company's creditors as a whole than would be likely if the company were wound up without first being in administration. This is the second statutory purpose prescribed by paragraph 3 of Schedule B1 (“Schedule B1”) to the Insolvency Act 1986 (the “1986 Act”).
Since their appointment, the Administrators have been operating the business of Amicus and running off its loan book. Amicus has continued lending by procuring that the Funders provide further financing to borrowers via the AMT structure. The total sums recovered by Amicus under the AMT from 20 December 2018 to 30 April 2021 was approximately £402 million, a substantial sum (albeit, under the trust structure, Amicus is mainly entitled to origination and service fees in respect of those sums). As of 30 April 2021, the remaining loan book serviced by Amicus under the AMT comprises 70 “legacy loans” (the “Legacy Loans”). As matters stand, servicing the Legacy Loans comprises substantially the whole business of Amicus.
To date, the administration has been funded from the following sources: (i) service and other fee income paid by the Funders under the AMT; (ii) administration funding agreements between Amicus, the Administrators and Hartford Growth (Trading) Limited (“Hartford Growth”), pursuant to which Hartford Growth has made available the total sum of £1,647,412.34; and (iii) retained loan redemptions.
Reasons for the Restructuring Plan
Mr Fry explained in his evidence that, for a variety of reasons, the Administrators consider that it is no longer financially viable, or in the interests of creditors, for Amicus to remain in administration, principally because the loan portfolio has proven to be considerably more challenging and more expensive to service and realise than had been anticipated by the Administrators. Mr Fry gave three main reasons for this.
First, the company has faced increased costs associated with Brexit and the Covid-19 pandemic, including a reduction in the value of security held by Amicus and a general contraction of the property finance market. Second, the company has suffered higher costs and greater difficulty in servicing and realising the Legacy Loans (many of which are in default) than had been anticipated at the outset of the administration. Third, the company has incurred significantly higher legal costs than had been anticipated due to disputes with debtors (some of which, Mr Fry suggested, might give rise to claims in negligence in favour of the company against certain surveyors or advisers and their insurers).
Moreover, Hartford Growth is not willing to provide further administration funding (and is not obliged to do so).
I was shown a cashflow forecast prepared by the Administrators which indicated that Amicus will not have sufficient funds to enable it to meet its ongoing liabilities (including wages and general overheads, but with the majority comprised of the professional fees of the Administrators and their legal advisers) in the short-term.
The forecast showed a positive opening cash balance as at week commencing 24 May 2021 of £543,946 and a negative closing cash balance as at 7 July 2021 of — £609,997, with the company operating at a significant loss throughout the whole period. The largest projected items of expenditure were the Administrators' professional fees together with certain other legal and professional fees, which accounted for the large majority of outgoings throughout the period. I was also shown an updated forecast dated as of 5 July 2021, which illustrated that Amicus was projected to go cash negative in week commencing 12 July 2021, and to operate at a loss in the short term. The updated forecast also indicated that the company had drawn down funds due to be provided to it by Twentyfour Asset Management LLP (“24AM”) (one of the participants in the AMT structure) pursuant to the Restructuring Plan.
The short point is that Amicus is, or will imminently be, cashflow insolvent, and it is only able to operate at all due to a combination of the forbearance of its professional advisers in not demanding payment of fees that have accrued due and the early draw down of funds provided by 24AM.
The Administrators have concluded that a Part 26A restructuring plan is the only alternative to placing Amicus into liquidation, which is said to be the relevant alternative to the sanction of the Restructuring Plan. The Administrators' position is that the Restructuring Plan will provide creditors with a better return than would be achieved in liquidation. It will, moreover, enable Amicus to be rescued as a going concern, which is the first statutory purpose of administration under paragraph 3(1)(a) of Schedule B1. To that end, as I shall explain further below, the intention is that if the Restructuring Plan is sanctioned, Amicus will exit administration and be returned to the control of its directors and be able to trade for the benefit of its shareholders.
Absent significant new funding, the Administrators' view is that Amicus cannot continue in administration for any further significant period and Mr Fry's evidence was that, if the Restructuring Plan is not sanctioned by the court, the Administrators intend to place Amicus into liquidation, resulting in a materially worse outcome for creditors as a whole.
The Restructuring Plan
Overview
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