Hot on the heels of Petrofac’s restructuring plan being overturned, the High Court has now refused to sanction another restructuring plan which proposed small payments to out of the money creditors.
Waldorf Productions UK Limited, an oil and gas company, ran into financial difficulties having issued bonds in excess of US$110,000,000, due to mature in September. These were secured over its assets including its key contracts, receivables, and bank accounts. It also had substantial unsecured debts mostly owned to two creditors, US$75,400,000 to HMRC and US$29,500,000 under terms of a settlement agreement to an M&A creditor.
Amongst other matters, the plan proposed an extension to the bond maturity date, and that unsecured creditors’ claims were compromised at 5% with a contingent further payment subject to conditions. This was set against the backdrop that in the relevant alternative those creditors would be “out of the money” and receive nothing. The unsecured creditors took issue with this, principally on the basis it had not genuinely explored the possibility a successful negotiation with them might have resulted in more favourable plan terms.
Applying the recent decision in Thames Water and Petrofac, Hildyard J considered there had been a departure from Virgin Active approach that de minimis payments to “out of the money” creditors was fair. The court accepted in this case there were only three major stakeholders to deal with - the bondholders, HMRC and the M&A Creditor but there had not been any real engagement with the unsecured creditors to determine if a plan could have been proposed on better terms for them.
This decision is being appealed and following a successful leapfrog application, we understand it will be heard by the Supreme Court alongside the appeal in Petrofac, which should provide much needed clarity on how to fairly address the interests of out of the money creditors (if at all) in restructuring plans.
Waldorf Production UK PLC, Re [2025] EWHC 2181
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