Revolution Bars Limited, Re
[2024] EWHC 2949 (Ch)
In the matter of CB & I UK Ltd
27 February 2024
[2024] EWHC 398 (Ch)
High Court
A big company needed to restructure its debts. One unhappy creditor, Reficar, initially fought the plan. But during the court case, the company offered Reficar a big share of the parent company. The judge decided that the plan was fair and approved it, even though Reficar was still unhappy because the improved offer came too late to completely stop the legal process.
Key Facts
- •CB&I UK Ltd applied for court sanction of its restructuring plan under Part 26A of the Companies Act 2006.
- •Two creditor classes did not approve the plan, including Refinería de Cartagena S.A.S. (Reficar) which holds a US$1.3 billion debt.
- •The plan aimed to extinguish Reficar's debt with minimal payment, utilizing the cross-class cram down power.
- •Substantial without prejudice negotiations occurred during the trial, culminating in an offer of US$75 million of preference shares in McDermott International, Ltd (MIL) convertible to 19.9% of MIL's ordinary share capital.
- •Parallel restructuring plans exist in the Netherlands (WHOA Plans), interlinked with the UK plan.
- •Reficar initially opposed the plan on jurisdictional and fairness grounds, but its position shifted during the trial due to the equity offer and a Dutch Restructuring Expert's recommendation.
- •The court considered various relevant alternatives, ultimately concluding that liquidation was the most likely outcome if the plan failed.
- •The court sanctioned the plan, despite Reficar's continued opposition, based on Reficar's guaranteed minimum 10.9% equity in MIL under the Dutch plans and the overall fairness of the outcome.
Legal Principles
Principles for exercising court discretion to sanction a scheme of arrangement under Part 26 of the CA 2006, applicable to Part 26A plans.
Re Virgin Atlantic Airways Limited [2020] EWHC 2376 (Ch) at [45]-[46]; Re Telewest Communications plc (No.2) [2004] EWHC 1466 (Ch), [2005] 1 BCLC 772; Adler (CoA) [2024] EWCA Civ 24 at [115]-[116], [128]-[147].
Jurisdictional requirement of 'give and take' in a 'compromise or arrangement' under Part 26A; avoidance of 'confiscation or expropriation of rights without compensating advantage'.
Re NFU Development Trust Limited [1972] 1 WLR 1548; Adler (CoA) [2024] EWCA Civ 24 at [258]-[278].
Determination of the Relevant Alternative at the time of sanction consideration; selection of the most likely outcome if the plan fails.
Virgin Active [2021] EWHC 1246 (Ch) at [106]-[108]; Re Hurricane Energy Plc [2021] EWHC 1759 (Ch) at [37].
Directors' unique perspective on the likely outcome of plan failure; careful scrutiny of evidence, considering the potential for 'doomsday' scenarios.
Re E D & F Man Holdings Limited [2022] EWHC 687 (Ch) at [39]; Re AGPS Bondco PLC [2023] EWHC 916 (Ch); Re Fitness First Clubs Limited [2023] EWHC 1699 (Ch) at [63].
The 'no worse off' test in s.901 G(3) requires that dissenting class members would not be worse off under the plan than in the relevant alternative.
Companies Act 2006, s.901 G(3)
Outcomes
The court sanctioned the restructuring plan.
The court found that the plan was a 'compromise or arrangement' despite minimal payment to Reficar; the relevant alternative was liquidation, leaving Reficar worse off; and the plan, considering the equity offer, was fair to Reficar.