This is essentially a landlord pain, tenant gain scenario where a High Court ruling has allowed River Island to impose a restructuring plan on its creditors under Part 26A of the Companies Act 2006.
A restructuring plan under Part 26A is a formal agreement between a company and its creditors (and/or shareholders) to restructure its debts. It allows a company to continue to trade while addressing its financial difficulties. The company doesn’t need to be insolvent to propose a rescue plan, it can do so if it’s likely to encounter financial difficulties.
Restructuring plans must be approved by the court and can be a powerful solution, but they’re also often contentious. They usually pit different groups of creditors against each sparking disputes between the stakeholders. Because this legislation is relatively new (introduced during Covid) no case law precedents exist. What it means in practice is, landlords can’t block this, even if it becomes financially ruinous for them.
On August 8, 2025, the High Court approved River Island’s wide-ranging restructuring plan, a plan to help the struggling fashion retailer achieve steep rent cuts and store closures, despite its creditors’ resistance to the judgement.
The plan involves closing 33 stores across the UK by January 2026 and rent reductions or potentially cuts zero rent for 71 additional outlets for up to three years.
River Island argued it was teetering on the edge of administration, citing unsustainable cost pressures and a projected insolvency “within weeks” without a deal
The court’s finding for the retailer comes after months of fighting financial pressures that left it with few options: to go into administration or fight for a rescue plan. The company had warned in June that without a rescue plan it could collapse “within weeks.”
At a meeting on 1 August only half of River Island’s creditors, including landlords and local authorities, backed the plan with the vote being short of the three-quarters majority required for automatic approval. However, the High Court judge overruled the creditors’ objections using a mechanism known as a “cross-class cram-down”, which had the effect of forcing the proposal through.
A "cross-class cram down" in a form of restructuring plan which was introduced by Part 26A of the Companies Act 2006 and allows a court to bind dissenting creditors to a restructuring plan, even if they don't approve the plan. The idea is that the mechanism can be used to prevent a few dissenting creditors from blocking a rescue plan that is beneficial to the majority of creditors and the company.
So, the High Court has waved through its restructuring plan, granting the high street stalwart permission to shutter 33 UK stores, slash rents on 71 more, and lean on £40 million in fresh funding from Blue Coast Capital, the Lewis family's investment vehicle.
The plan was approved by Judge Sir Alastair Norris and aims to restore the company to profitability, to improve its short-term cash flow, and safeguard jobs. That’s according to the submissions put forward for River Island. Landlord opposition to the plan failed to derail it, unlike some earlier similar cases.
Landlords are struggling to come to terms with their new situation after many decades of certainty of income with contracts backed by the courts. What’s more, the restructuring is not guaranteed to be successful if sales don’t improve. The case will be watched carefully by other retailers – will landlords dig in and appeal, or will this encourage more restructuring.
Restructuring Plans and the “cross-class cram down” mechanism was introduced during the Covid period by the Corporate Insolvency and Governance Act 2020 (CIGA), June 2020. Part 26A (Restructuring Plans) allows dissenting classes of creditors or members to be bound to a restructuring plan.
It boils down to the fact that classes of creditors who vote against a proposal, but who would be no worse off under the restructuring plan than if the inevitable were to happen, then they cannot prevent it from proceeding.
Kathleen Garrett, a partner at Reed Smith told CityAM:
“Today’s judgment from the High Court felt pretty inevitable but was by no means a slam-dunk. This is the latest in a series of judgments that have seen the courts prioritise rescuing a business over the interests of creditors especially where it comes to use of cross-class cramdown to compromise landlord claims where necessary to facilitate a company’s rescue’”
There is an appeals process that landlords could take but legal opinion has it unlikely given the legal costs and uncertainty of outcome involved. Therefore, the High Court’s decision last Friday August 8 became a decisive moment in the retailer’s fight for survival.
Last October’s budget increase in National Insurance Contributions (NICs), it seems, have resulted in increasing pressure, not just on retailers but on their landlords as well. Retailers’ wage bills have increased considerably since the budget while River Island alone paid £11.1m in employer NICs, a cost that contributed to its loss-making status. Landlords are now feeling the NICs squeeze indirectly, since retailers generally are pushing back on rents to offset their rising wage bills.
The NIC rise has been shown to be fuelling downstream rent reductions and store closures. It's a domino effect wage inflation is leading to tenant distress which in turn leads to requests for rent reductions and store closures. Ultimately, it’s the landlords who are left in a no win situation: reduce rents or face an uncertain void period, with all the extra costs that entails.
River Island can trace its roots back to a fruit and vegetable market stall started by the Lewis family in north London in 1948. A move into knitting wool sales led to entering the retail fashion trade in the 1970s under the Chelsea Girl and Concept Man brands. These two were eventually merged into River Island in 1988.
River Island began selling clothing under the Lewis’s name in the 1940s and desperately needed this restructuring plan to help it save more than 4,000 jobs by closing 33 of its chain of 230 stores. While it will also benefit from the rent reductions, the company is by no means out of the woods as people continue the shift to buying online.
The plan will reduce the company’s cost base, but still more than 1,000 jobs and a further 70 sites at risk. Ben Lewis, the retailer’s chief executive, has been quoted as saying the reduction in rent payments will enable the company to “align our store estate to our customers’ needs. We are pleased that River Island’s restructuring plan has been approved by the high court.
“We have a clear transformation strategy to ensure the long-term viability of the business, and this decision gives us a strong platform to deliver this. Recent improvements in our fashion offer and shopping experience are starting to show results, and the restructuring plan will enable us to align our store estate to our customers’ needs,” Mr Lewis said.
Landlords are being forced to take a haircut. The loss of rental income will have serious implications for some with a substantial cash flow squeeze, not just a cut in some instances, but no rent at all.
Rental yields are the determining factor in the commercial property industry when valuations are done. No rent means a serious drop in the value of a commercial property, often leading to the breaching of financing or LTV covenants. It leaves them paying higher rates of interest or being told to provide an equity injection.
This court decision, if it stands, sets a precedent risk as other struggling retailers may well go down the same route: retailers like Poundland could soon follow, expecting to get the same outcome. An appeal is possible but will take time and it is expensive. According to CityAM, few landlords are in a position right now to take up the challenge of an appeal, even if they believe they could succeed.
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