Petrofac restructuring plan overturned by the Court of Appeal

In this alert, we consider the Court of Appeal’s judgment setting aside Petrofac’s restructuring plan sanction order, which marks the second occasion on which the Court of Appeal has overturned a previously sanctioned plan (following Adler in 2024). It follows the Court of Appeal’s other recent judgment approving the sanction of the Thames Water restructuring plan, another highly contested case.

The judgment will likely have a significant impact on the structuring of restructuring plans in the future, with the judgment addressing issues such as:

• how the benefits preserved or generated by a restructuring should be allocated fairly between different stakeholder groups
• considerations around how to justify the pricing of new money and backstop/work fees in the context of a comprehensive balance sheet restructuring
• the need to consider, in the specific circumstances of the deal, whether a “fair” allocation involves providing out of the money creditors with something more than token consideration (echoing some of the Court of Appeal’s previous commentary in Thames Water)
• the importance of the right evidence from plan companies to rationalise the terms of a proposed deal—simply providing for a “no worse off” outcome for all affected stakeholders may not persuade a court from a fairness perspective.

For more details and a further consideration of the implications, our detailed alert can be downloaded below.