Petrofac Limited & Anor, Re

For the purposes of Condition A under Companies Act 2006, the relevant alternative is the outcome most likely to occur if the restructuring plan is not sanctioned. A speculative or insufficiently formed alternative will not qualify. The no-worse-off comparison principally concerns the immediate, direct and financial consequences of the plan and the relevant alternative. Indirect economic benefits may be too remote for this jurisdictional inquiry, although they may remain relevant to fairness and discretion. At the sanction stage, the court must assess the allocation of preserved or generated value between creditor groups. A departure from pari passu treatment requires justification, including by reference to the source of the preserved value and the risks undertaken by new-money providers.

Petrofac Limited and Petrofac International (UAE) LLC sought sanction of interlocking restructuring plans under Part 26A of the Companies Act 2006. Most creditor meetings approved the plans, but meetings comprising joint venture partners and related claimants opposed them.

The court had previously made a convening order following its judgment at [2025] EWHC 859 (Ch). The sanction hearing concerned three issues: whether the relevant alternative was group-wide liquidation or a revised restructuring proposal; whether the dissenting creditors would be worse off under the plans; and whether the plans should nevertheless be refused as unfair or contrary to the court’s discretion.

1. Relevant alternative. Condition A required identification of the outcome most likely to occur if the plans were not sanctioned. A proposed alternative must be sufficiently specified and realistically capable of implementation. On the evidence, the relevant alternative was group-wide liquidation, not Plan B. Plan B depended on immediate agreement by other creditors and new-money providers to reopen a carefully negotiated restructuring. That agreement was unlikely.
2. No-worse-off test. Section 901 G(3) of the Companies Act 2006 required comparison of the hypothetical consequences of the plans with those of liquidation. Direct financial benefits had to be compared. The words any worse off did not prevent the court from applying limiting principles to an otherwise potentially infinite causal inquiry.
3. Indirect economic benefits which Saipem and Samsung might obtain from Petrofac’s disappearance as a competitor were real, but too remote for the jurisdictional Condition A inquiry. They were indirect, difficult to quantify and unsuitable for an open-ended market investigation. They could, however, be considered at the discretionary and fairness stage. The dissenting creditors were not worse off by reference to the relevant direct financial benefits, so Condition A was satisfied.
4. Fairness and discretion. The court retained a general discretion to sanction the plans. The no-worse-off requirement was necessary but not sufficient. The court had to examine differences in treatment between creditor classes and whether those differences were justified. The starting point was broadly pari passu allocation of preserved value, but departures could be justified by priority, the provision of new money, commercial risk and the source of the value preserved or generated.
5. The plans’ treatment of new investors, secured creditors and unsecured creditors was justified. The dissenting unsecured creditors were treated broadly consistently with similarly placed creditors. The indirect economic benefit of liquidation did not require special additional consideration. The plans were sanctioned.

The judgment records that the court had previously made a convening order following its judgment at [2025] EWHC 859 (Ch). Permission to appeal on class composition had been granted by the Court of Appeal, but that appeal had not been heard when this sanction judgment was delivered.