The summer heatwave has started and this will no doubt result in an influx of Airbnb and holiday rentals. Nevertheless, the short-term lettings market is clearly still recovering from the financial impact caused to this sector during the pandemic.

The Part 26A restructuring plan introduced in the UK by the Corporate Insolvency and Governance Act 2020 (CIGA2020) suffered a slow start and has been primarily used to date by large corporates with average revenues of c£700m (Virgin, Pizza Express, Smile Telecoms etc) – no surprise here as it is understandable for medium-sized enterprises to stick with the tried and tested approach of restructuring schemes rather than risk potential challenges of an unknown process.

However, the first SME has now bravely entered to the market. The latest Part 26A plan has been proposed by Houst Limited, a holiday lettings management services business which employs 300 people worldwide and provides management services for property owners renting out their homes as short-term holiday lets. Houst claims that pre-pandemic it had valued the business at £33million but the coronavirus lockdowns had substantially impacted its business and left it with significant liabilities including approximately £1.7m owed to HMRC. Houst have claimed that if the restructuring plan is not implemented, it will have no alternative but to enter a pre-pack administration process after a marketing period.

On 14 June 2022, the English High Court granted six plan meetings for Houst. The plan envisages a new capital injection through issuance of new preference shares worth a minimum of £500,000. HMRC forms a secondary preferential creditor in accordance with the plan. 

To implement the plan, Houst would have to obtain consent from the requisite 75% in value of each class of creditor. However, one of the key features of Part 26A plans is the ability of the Court to sanction plans where there has been a class (or classes) where that 75% approval threshold has not been met (known as cross-class cram down).

We wait with anticipation to see how the Houst Part 26A plan progresses following the convening of its six plan meetings and whether this will result in a further uptake by other SMEs to this new and flexible restructuring procedure.