McDermott Comment | Caffe Nero CVA Challenge Trial Begins

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Aymen Mahmoud, partner at law firm McDermott Will & Emery, said:

“The CVA is a compromise arrangement which is designed to bind minority creditors to an arrangement made with a majority and so it is likely that the courts will uphold the effect of a CVA absent material cause to do so. That the court examined the case with due attention as to whether the threshold for unwinding the CVA is an important test case and shows that the courts will consider CVA challenges on their merits but here we have an example where the threshold for overruling a CVA has not been met and that threshold is necessarily high. Notably, it is also clear that there was potential for investment in the Caffe Nero group around the time of the CVA and it is not known how much the existence of a CVA featured as a consideration for the investor and indeed whether the absence of a CVA would have reduced appetite for such investment.”

Mark Fennessy, partner at law firm McDermott Will & Emery, added:

“The Caffe Nero case is another setback for landlords seeking to challenge CVAs and restructuring plans following the decisions in New Look, Regis and Virgin Active. Landlords seeking to challenge CVAs on the basis of unfair prejudice or material irregularity need to carefully assess their options in the light of these decisions.”