Houst Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Adam Johnson |
| Judgment Date | 14 June 2022 |
| Neutral Citation | [2022] EWHC 1765 (Ch) |
| Docket Number | Case No: CR-2022-001644 |
| Court | Chancery Division |
[2022] EWHC 1765 (Ch)
Mr Justice Adam Johnson
Case No: CR-2022-001644
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
COMPANIES COURT (ChD)
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Marcus Haywood for the Applicant Company
This is the hearing of an application by Houst Limited (the “Company”) for an order pursuant to section 901C of the Companies Act 2006 convening five meetings of creditors and one meeting of members for the purposes of considering (and, if thought fit, approving) a proposed restructuring plan in respect of the Company (the “ Restructuring Plan”).
The application is supported by two witness statements of Mr James Jenkins-Yates, who is a director of the Company and its founder.
The business of the Company is the provision of property management services in respect of short-term holiday lets. The Company's business focuses on using technology to streamline services to its customers. Property owners (referred to as “ Hosts”) who wish to let their property to guests on a short-term basis sign up to the Company's online platform. The Company then lists the Hosts' properties on various websites which advertise mainly short-term lets. The Company manages the guests' bookings and logistics, ensuring that the stay progresses with little or no need for direct Host involvement. The Company earns revenue from a share of the booking value.
As in many other areas, the Company's business has been severely affected by the coronavirus pandemic and the impact of the pandemic on the travel and hospitality industries more generally. The Company is now cashflow insolvent. The objective of the Restructuring Plan is to allow the Company to be returned to solvency and for its creditors and members to receive more than they would if the Company were placed into administration, which the Company says is the relevant alternative.
The members and creditors affected by the Restructuring Plan were provided with details of the Restructuring Plan by way of a Practice Statement Letter sent on 31 March 2022. An update to the Practice Statement Letter was later sent on 19 May 2022, providing details of the present hearing. Drafts of the Explanatory Statement and the Restructuring Plan were uploaded to a dedicated plan website on 6 June 2022 (and members and creditors affected by the Restructuring Plan were informed of the same by letter).
There has been ongoing dialogue with the Company's major creditor, Clydesdale Bank Plc (the “ Bank”). No objections in relation to the Restructuring Plan as such have been raised to date, although recently it has come to light that, at least as presently advised, one other principal creditor, namely HMRC, is minded to vote against the Restructuring Plan. That, however, is subject to further efforts to engage with HMRC, which I understand will now continue before the proposed Restructuring Plan meetings, which I will come on to.
As to the present financial position of the Company, it has total current liabilities of approximately £5,200,000 and non-current liabilities of £3,754,000.
These liabilities include: (i) an overdraft of approximately £400,000 provided by the Bank to the Company;(ii) a term loan of approximately £2,365,000 provided by the Bank to the Company; and (iii) liabilities to HMRC in the sum of £1,775,238.
The Bank has the benefit of a Debenture dated 28 January 2020 granted by the Company.
The Company is unable to service the current loan obligations owed to the Bank. The Bank has deferred a capital payment of £140,000 due on the term loan at the end of January 2022 to March 2022, which has not been repaid.
I understand from the evidence that three creditors have recently either threatened winding-up petitions against the Company and/or served statutory demands. They are: (i) HMRC in respect of the sums owed to it; (ii) Almaviva Services SRL (“ Almaviva”), a call centre provider, which is owed sums in the region of £385,000; and (iii) Citiclient (CPF) Nominees No 2 Limited (“ CPF”), the Company's former landlords, who are owed a sum in the region of £112,000.
The Company does not have sufficient cash to enable it to meet these demands. The evidence of Mr Jenkins-Yates is that the only reason that these creditors appear to have held off presenting winding-up petitions thus far is because of the proposed Restructuring Plan.
Given its financial position, if the Restructuring Plan is not implemented, the directors consider they will have no alternative but to commence an accelerated marketing process to facilitate a sale of the Company's business and assets within an administration of the Company (ie a pre-pack administration).
Moving on to the terms of the Restructuring Plan, in outline, these will involve:
(vi) A minimum of £500,000 of new capital being advanced by certain members to the Company in exchange for the issue of new preference shares by the Company (the sum may be increased to £750,000).
(ii) A reduction in the sum outstanding to the Bank (referred to in the Restructuring Plan as the “ Secured Creditor”) with a total of £750,000 to be repaid over three years.
(iii) The Company making what are called “ Monthly Contributions”, to be used to make payments to the “ Plan Creditors” (excluding the Secured Creditor, i.e. the Bank), in amounts expected to be higher than if the Company were to go into administration.
For the purposes of the Restructuring, the Plan Creditors comprise the following:
(vi) The Bank (i.e. the Secured Creditor).
(ii) HMRC (referred to in the Restructuring Plan as the “ Secondary Preferential Creditor”).
(iii) The trade creditors listed in schedule 4 to the Restructuring Plan (the “ Trade Creditors”), who include Almaviva and CPF.
(iv) Certain Convertible Loan Holders and Loan Note Holders, being those persons identified in schedule 3 of the Restructuring Plan (the “ Loan Holders”).
(v) A connected company, Homesorted Limited (referred to in the Restructuring Plan as the “ Connected Party Creditor”).
The Restructuring Plan is not intended to compromise, release or affect any claim other than a claim by a plan creditor.
Specifically excluded from the plan are the following:
(vi) Liabilities owed to customers.
(ii) Liabilities owed to certain critical suppliers.
(iii) Liabilities to employees.
Under the terms of the Restructuring Plan, all present claims of the Plan Creditors will be irrevocably and unconditionally compromised, released and discharged. Instead, the Plan Creditors will be treated as follows:
(1) As already mentioned, the Bank will receive a total of £750,000, £250,000 to be paid straightaway and a further £500,000 to be paid over three years.
(2) The Company will make monthly contributions in specified amounts to two funds, the first fund to be used to make payments to HMRC and the second fund to be used to make payments to the Trade Creditors. The first fund is referred to as the “ Secondary Preferential Creditor Payment Fund” and the second as the “ Unsecured Creditor Payment Fund”.
(3) The Loan Holders are effectively given the option of swapping their existing debt for equity in the Company by various methods. If they choose to retain their debt, they are to be paid out of the same fund as the Trade Creditors.
(4) Homesorted (the Connected Party Creditor) has agreed that it will receive nothing under the Restructuring Plan.
That summarises the position of the Plan Creditors, but the Restructuring Plan also contains provisions which will affect the members. The purpose of these...
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Houst Ltd
...set out in the judgment of Adam Johnson J dated 14 June 2022 giving reasons for convening meetings of creditors and shareholders: [2022] EWHC 1765 (Ch). The following is a summary only of the matters relevant to this 3 The Company's business is the provision of property management services ......