Waldorf Production UK Plc, Re

At a convening hearing under Companies Act 2006 Part 26A, the court does not determine the merits or fairness of the restructuring plan. It considers whether the statutory jurisdictional conditions are prima facie satisfied, whether creditors have received sufficient notice, whether any obvious and fatal roadblock exists, and whether the proposed classes are properly constituted.

The jurisdictional threshold is low. The court need only be satisfied that the company has encountered, or is likely to encounter, qualifying financial difficulties and that the proposal contains sufficient give and take. Potentially arguable roadblocks ordinarily need not be determined as preliminary issues before the sanction hearing.

Waldorf Production UK Plc applied under Part 26A of the Companies Act 2006 to convene meetings of secured bondholders and unsecured creditors to consider a restructuring plan.

The plan sought to extend bond maturities, compromise liabilities owed to HMRC and Capricorn Energy Plc, and facilitate a solvent sale or continued realisation of the company’s oil and gas assets. The application was supported by the Bond Trustee and SteerCo, but opposed in procedural and substantive respects by Capricorn and HMRC.

The issues were whether the statutory conditions and jurisdictional requirements were met, whether there was any obvious roadblock to sanction, whether the proposed two-class structure was appropriate, and what directions should govern objections before any sanction hearing.

1. Application granted. The court ordered the convening of two creditor meetings, comprising secured creditors and unsecured creditors.
2. At the convening stage, the court’s function is limited. It considers whether the jurisdictional conditions in section 901A are prima facie satisfied, whether sufficient notice has been given, whether an obvious roadblock makes sanction impossible or futile, and whether the proposed classes are properly constituted. The merits and fairness of the plan are reserved for any subsequent sanction hearing.
3. Condition A was satisfied because the company had encountered, or was likely to encounter, financial difficulties affecting its ability to continue as a going concern. Condition B was also prima facie satisfied. The plan involved sufficient give and take to constitute an arrangement, was between the company and classes of creditors, and was intended to mitigate the financial difficulties.
4. No obvious roadblock was established. Although Norwegian law might not recognise or enforce the plan directly, proposed mirror arrangements under Norwegian law meant that the issue was not presently fatal.
5. The proposed classes were appropriate. The relevant test was whether creditors’ rights were so dissimilar that they could not consult together with a view to their common interest. The Lock-Up Agreement and associated fees did not fracture the bondholder class.
6. Under the Practice Statement, a creditor raising a possible roadblock should identify it promptly. However, more arguable points, or points requiring further evidence, do not ordinarily require determination as preliminary issues before the sanction hearing. HMRC was permitted time to crystallise any objection and notify the company and interested parties.