The new Corporate Insolvency and Governance Bill, currently expected to be enacted in mid-June 2020, is likely significantly to impact secured and unsecured bank debt.
Most fundamentally, the Bill introduces a debtor-in-possession insolvency procedure for the first time in English law. This appears to grant super-priority to certain pre-moratorium unsecured debts (likely including unsecured banking and finance arrangements) which means that they will rank above other debts (including potentially financial debts secured by a floating charge) where a company enters into administration or insolvent liquidation within 12 weeks of a new moratorium ending. These changes could upset the delicate balance between debtors and creditors under UK insolvency law and, potentially, the balance between secured and unsecured financial creditors.
Our Restructuring, Turnaround and Insolvency team has analysed the likely impact on secured and unsecured bank debt in this note on our website. For an analysis of the effect on other key groups, see the team’s notes on the impact on supply chains and their customers and on landlords’ recoveries in an insolvency process.