The Insolvency Service recently opened a consultation (the "Consultation") on its proposals for a restructuring moratorium. Under the proposals, eligible companies satisfying certain qualifying conditions would be able to apply to court for a moratorium to prevent creditor action (a "Moratorium"). The Moratorium is not intended to be an alternative to formal insolvency for companies that are already insolvent but is intended to support viable companies reach a compromise with their creditors.
The Consultation notes that between now and 2015, around £90 billion of debt used to finance leveraged buy-outs during the past five years will have to be refinanced. The complexity and scale of the financing arrangements for this debt pose a number of challenges to viable companies and their creditors negotiating a compromise. The Moratorium is intended to support such companies negotiate a contractual work-out, company voluntary arrangement or scheme of arrangement with their creditors.
The closing date for responses is 18 October 2010.
Click here to view our summary of the Consultation.