Re DeepOcean 1 UK Ltd

This is a convening-stage judgment under Part 26A of the Companies Act 2006 bringing the new restructuring plan procedure into play. The court considered jurisdiction, the statutory threshold conditions in section 901A (conditions (a) and (b)), class composition, compliance with the Practice Statement and other non‑merits issues such as recognition in the Netherlands and practical aspects of voting and claim admission. The judge concluded that each Plan Company has encountered or is likely to encounter financial difficulties sufficient to satisfy section 901A(2) and that the purpose of the proposed compromise or arrangement mitigates the effect of those difficulties so as to satisfy section 901A(3).

Class composition was approved with four classes proposed (secured finance creditors; UK landlord creditor; UK vessel owner creditors; other unsecured creditors) and the court directed convening of creditor meetings. The court noted practical disputes (notably as to valuation of vessel owners' claims and the possible effect of third‑party releases against a Dutch parent) but treated these as matters for the sanction hearing or for claim adjudication mechanisms provided in the plan. Directions were given for adequate qualification of the explanatory statement and for the timetable leading to a sanction hearing on 13 January 2021.

Background and parties: The applicants were DeepOcean 1 UK Limited, DeepOcean Subsea Cables Limited and Enshore Subsea Limited (together the Plan Companies), part of the DeepOcean Group which provides subsea services. The three companies operate the cable laying and trenching business (the CL&T Group). The CL&T Group has a history of underperformance and long‑running need for group funding; the wider group had decided it could no longer continue funding the Plan Companies and COVID‑19 had exacerbated underutilisation of vessels.

Nature of the application: The Plan Companies applied under section 901C of the Companies Act 2006 for orders convening meetings of creditors to consider restructuring plans under Part 26A (the restructuring plan procedure introduced by the Corporate Insolvency and Governance Act 2020). Relief sought was an order to convene creditor meetings, approval of class composition proposals and directions as to notice, documentation and timetable towards a sanction hearing.

Issues framed: The court identified the matters to be addressed at the convening hearing pursuant to the Practice Statement: (i) jurisdiction and international service/recognition issues; (ii) satisfaction of conditions (a) and (b) in section 901A; (iii) class composition; (iv) other non‑merits issues that might lead the court to refuse sanction; and (v) practical aspects of notice, explanatory materials and meeting arrangements.

Court’s reasoning and subsidiary findings:

• Jurisdiction: The court was satisfied it had jurisdiction to convene meetings of all Plan Creditors. The Recast Judgments Regulation did not prevent jurisdiction because many creditors were domiciled in the United Kingdom and Article 8 permitted joinder where claims were closely connected.
• Conditions (a) and (b): The evidence showed each Plan Company had encountered, or was likely to encounter, financial difficulties affecting its ability to continue as a going concern, satisfying section 901A(2). The court adopted a purposive construction of section 901A(3), finding that a compromise that improves creditor recoveries (even if the company will not continue trading) can mitigate the effect of those difficulties; accordingly condition (b) was satisfied.
• Class composition: The court applied the established Part 26 approach. It approved four classes for each Plan Company: secured lenders; the UK landlord creditor (single); the UK vessel owner creditors (two bodies); and the remaining unsecured creditors. The court found the proposed divisions appropriate given differing rights and recoveries.
• Other non‑merits issues: The judge identified potential Dutch recognition issues and the effect of third‑party releases of guarantees as matters for the sanction hearing. The valuation dispute raised by a vessel owner (Havila) as to the quantum of its claim was noted; the court directed that explanatory materials be amended to reflect uncertainty and that claim admission will be addressed at meetings and via the plan’s adjudication procedures if necessary.
• Procedure and timetable: The Practice Statement's notification requirements were met. The court directed convening of meetings and set a preliminary sanction hearing for 13 January 2021, with liberty to seek further directions if complex opposition requires a longer hearing.

Practical implications: The judgment confirms that Part 26A can be used where restructuring enhances creditor returns even if the company will not continue as a going concern, clarifies class composition approach mirrors Part 26, and highlights recognition and third‑party release issues are typically reserved for sanction.

The court made the convening orders under section 901C of the Companies Act 2006, directing meetings of creditors for each Plan Company to consider the proposed restructuring plans. It held that the statutory conditions in section 901A were satisfied (companies faced financial difficulties and the plans had the purpose of mitigating those effects), approved the proposed class composition, found that procedural notice requirements had been met and gave directions for the meetings and the sanction timetable. The court reserved detailed determinations on disputed valuations, cross‑class cramdown and Dutch recognition issues for the sanction hearing.