Hurricane Energy plc

The court granted the company’s application to convene meetings under Part 26A of the Companies Act 2006 to consider a scheme (Plan) affecting unsecured bondholders and shareholders. The judge held that notice to bondholders was adequate, that the court had jurisdiction under Part 26A, and that the low threshold in section 901A (Conditions A and B) was satisfied on the evidence, including the PwC report. The judge applied the established test for class composition and concluded a single class meeting of Bondholders was appropriate, but that shareholders are "affected by" the Plan and must be permitted to participate in a meeting because the allotment of shares under the Plan would dilute their economic participation and disapply pre-emption rights under the statutory regime. The court declined to halt the process for lack of fairness at the convening stage, reserving those matters for the sanction hearing, and gave directions for remote meetings and a timetable for the sanction hearing.

This was a first-instance convening hearing under Part 26A CA 2006 in respect of a restructuring plan proposed by Hurricane Energy Plc to address an anticipated inability to repay $230 million of unsecured bonds maturing 24 July 2022. The Plan proposed release of $50 million of bonds, extension of the bond maturity to 31 December 2024, the allotment of shares representing 95% of fully‑diluted equity to bondholders and an increase in bond interest, thereby enabling an extended wind-down of production from the Lancaster Area to maximise returns to bondholders.

The court was asked to determine (i) adequacy of notice, (ii) jurisdiction to sanction a Plan, (iii) whether threshold conditions in section 901A CA 2006 were met, (iv) class composition for meetings, (v) whether any "roadblock" existed to prevent convening meetings, and (vi) practical directions for convening. The company relied on a PwC report analysing alternatives (uncontrolled liquidation or controlled wind-down) and estimating prospective recoveries for bondholders.

The judge concluded that 21 days’ notice to bondholders and publication via RNS and the company website to shareholders was sufficient in all the circumstances. Jurisdiction was clear because the company is incorporated in England and Wales. Condition A was satisfied on the PwC evidence because the company was likely to encounter financial difficulties affecting its ability to continue as a going concern. Condition B was satisfied because the Plan was designed to mitigate those difficulties and to provide an enhanced recovery to bondholders compared with the realistic alternative. On class composition, a single class of Bondholders was appropriate since their existing and proposed rights were aligned and no incentives fractured the class. The judge held that shareholders were "affected by" the Plan because the proposed allotment would dilute their rights and would trigger statutory disapplication of pre-emption rights (sections 549/561/566A), therefore shareholders must be permitted to participate in a meeting under section 901C(3).

The court emphasised that the convening hearing is not the occasion to decide fairness or sanction the Plan; shareholder objections as to financial projections, valuation and timing were matters for the sanction hearing. No obvious "roadblock" existed to prevent convening meetings. Directions were given for remote meetings on 11 June 2021 and for a sanction hearing listed for 21 June 2021, with a timetable for oppositional evidence from shareholders.

The application to convene meetings was granted. The court ordered that two meetings be summoned: one meeting of Bondholders and one meeting of shareholders, holding that (i) notice was adequate in the circumstances, (ii) the court had jurisdiction under Part 26A CA 2006, (iii) the statutory threshold conditions in section 901A were satisfied on the evidence, (iv) a single class meeting of Bondholders was appropriate, and (v) shareholders were "affected by" the Plan and therefore entitled to participate in a meeting. The convening hearing did not resolve the fairness of the Plan, which was reserved for the sanction hearing listed for 21 June 2021.