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The new regulations for pre-packs with connected persons and the impact on secured lenders

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Sophie Waples

Senior Associate

London

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30 July 2021

The new regulations on pre-pack sales to connected persons have introduced additional hurdles for pre-pack transactions. In this article, we reflect on the potential implications of the new regulations for secured lenders in a restructuring. With sufficient forward planning, it should be possible to maintain the efficiency of the pre-pack process. 

The key points considered in this article are:

  • If secured lenders (as connected persons) engage the evaluator as part of the pre-pack planning process prior to the commencement of the administration then the secured lenders will arguably walk away with a more robust and defensible sale without any resulting delay.
  • Secured lenders could execute a successful pre-pack sale without becoming connected persons; they may wish to do so to avoid the complexities of obtaining creditor consent or an evaluator’s report.
  • It is unclear what the extent of liability attaching to an evaluator could be and what recourse a creditor or the administrator could have to the evaluator; this uncertainty could result in difficulties for a secured lender (as a connected person) when negotiating an appropriate fee arrangement with a potential evaluator.

For further information on the new regulations, see our bulletin here

This article was initially published in the July/August 2021 edition of Butterworths Journal of International Banking and Financial Law.

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