U.K. car park operator National Car Parks, or NCP, has excluded its largest landlord Global Mutual from its proposed part 26A restructuring plan, according to the explanatory statement issued after last week’s convening hearing. Continue reading for our EMEA Core Credit team's reporting on National Car Parks (NCP) and request a trial for access to the linked documents and reporting on hundreds more stressed, distressed and performing credits.
Chariot Bidco Lux, owned by real estate company Global Mutual, is NCP’s largest landlord holding 37 leases and is excluded from the plan. By contrast the group’s second largest landlord holds six sites. The Chariot leases generated £39 million of annual revenue for the Plan Company based on the 12 months to February 2020.
NCP considered the Chariot portfolio to be of strategic importance with “national and regional critical mass” that renders it distinct from any other landlord. According to NCP, if the Chariot Leases were to come to market it may disrupt the existing marketplace by increasing competition to the detriment of NCP. As such NCP considers it commercially unacceptable to provide any incentive to Chariot to seek to forfeit or terminate the portfolio.
Instead NCP and Chariot have agreed amendments in parallel to the restructuring plan that is conditional upon the sanction of the plan. On April 14, NCP and Chariot entered into a commitment letter to amend the Chariot Leases. The amendments will save NCP £2.5 million per annum and includes the following:
- Six uneconomic Chariot Leases will be surrendered for nil consideration within 10 days of the Effective Date of the Restructuring Plan.
- The current passing rent payable under the Chariot Leases will in aggregate be reduced to £17.7 million from £20.8 million. NCP is of the view that this bespoke rent reduction was not achievable as part of the restructuring plan.
- Chariot will grant the Plan Company a six month rent-free period in exchange for an extension to the term of each Chariot Lease. The new leases will expire 20 years after the effective date of the Restructuring Plan, equal to an average extension of around three years. NCP says this will result in an immediate saving of around £9.9 million.
- The Chariot Leases will be guaranteed by a newly incorporated parent of NCP.
NCP said that the main differences between the Chariot lease terms and the terms of the wider restructuring plan are that the Chariot Leases were not categorized in accordance with the lease categorization criteria, and the benefit of a group guarantee.
The category A lease categorization criteria are as follows:
The view of ESG Impact, which owns and is the landlord of four car parks leased by NCP, and connected company Aberdeen Worldwide Group, or AWG, is that Global Mutual has obtained a deal that is “materially better than the arrangement proposed for other landlords under the terms of the plan.”
They note that in the relative alternative of insolvency, the Chariot leases and other landlords would otherwise be ranked pari passu. ESG and AWG told the court during Friday’s convening hearing
that they are presently minded to oppose the sanction of the plan if further details of the commercial rationale behind the exclusion of the Chariot leases are not forthcoming.
The alternative to the plan would be for NCP to enter administration, it said. According to a comparator report prepared by Deloitte, NCP said there were three likely outcomes in this scenario: A prepack sale of the company and its assets; a sale of the parts of the business and assets of the company in a trading administration; and a liquidation of the business. Out of these alternatives, the prepack would be the most likely and would lead to the best returns for creditors.
A breakdown of estimated returns to creditors in the relevant alternative scenarios is below:
-- Connor Lovell