McLaren Financing Dispute To Be Sped Through UK Courts

By Paige Long
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Law360, London (June 19, 2020, 9:28 PM BST) -- A London judge on Friday agreed to expedite a hearing that will determine whether sportscar company McLaren can go ahead with an "urgent" round of refinancing that it says will help it avoid an impending liquidity shortfall due to the coronavirus pandemic.

Judge Anthony Mann said that a speedy trial is justified, considering the risk of insolvency that the sportscar maker and owner of the Formula 1 motor-racing team has claimed to be facing if a dispute over its planned refinancing is not settled.

McLaren Holdings Ltd. is seeking a declaration from the court that security held over a collection of classic cars and the company's headquarters in Woking, Surrey, can be released so it can raise money through a number of proposed transactions.

McLaren, which employs around 4,000 people in the U.K. and includes the company's racing and technology divisions, says it has "fallen into severe and unexpected financial difficulty" because of the COVID-19 pandemic, which has affected car sales and disrupted the Formula One season.

Tom Smith QC, McLaren's lawyer, told the judge earlier Friday that the court needs to weigh in on the legality of its proposed refinancing before July 17, when the company estimates it will run out of money. He said two potential transactions have been lined up involving the sale of the heritage cars and a leaseback of the property to address its lack of liquidity.

McLaren Holdings filed a Part 8 claim in the High Court on June 16, naming US Bank Trustees Ltd. as a defendant. The company is a security agent and trustee of the senior secured notes at the heart of the deals, according to court documents.

McLaren, which also makes high-performance cars, says that US Bank Trustees can release the security that is held over the heritage cars and property, so long as the carmaker certifies the move.

The dispute landed in court after the planned transactions were challenged by a group of creditors, including hedge funds and debt investors, that have an interest in two series of notes issued by McLaren. They have alleged the plans are unlawful.

At Friday's remote hearing, Smith told Judge Mann that McLaren was only informed of the objections on June 7, and initiated the court proceedings as quickly as it could.

"This isn't a case where the claimant has delayed bringing this case to court," he told the judge earlier in arguments. "There is a real need of urgency here. All interests in the group … might suffer if the proceedings are not expedited."

The parties have proposed that the matter be dealt with at a two- or three-day trial starting July 2.

Judge Mann called the suggested trial timetable "ambitious" and the "most aggressive" he's ever seen. The hearing will involve scrutiny of creditor agreements and what conditions need to be satisfied for security agents to dispose of assets, including a focus on what safeguards have been built into the existing arrangements.

Judge Mann asked the parties to provide more information by Monday on what specific issues the trial judge will need to weigh in on, so he can assess whether any revisions to timings need to be made. Due to the speed of the action, no particulars beside the claim form and the summaries in skeleton arguments have been submitted to the court so far.

Simon Gaul, a noteholder, also asked to be joined to the proceedings on Friday, arguing that without him there would be no party before the court to represent the noteholders. The US Bank Trustees is neutral and McLaren is acting to advance its own economic interests, Gaul said. Neither side opposed his application.

McLaren is represented by Tom Smith QC and Ryan Perkins of South Square, instructed by Ashurst LLP.

US Bank Trustees Ltd. is represented by Adam Al-Attar of South Square.

Simon Gall is represented by David Wolfson of One Essex Court and Henry Hoskins, instructed by Boies Schiller Flexner (UK) LLP.

The case is McLaren Holdings Ltd. v. US Bank Trustees Ltd., case number FL-2020-000019, in the High Court of England and Wales.

--Editing by Orlando Lorenzo.

Update: This story has been updated to add additional information about McLaren.

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