Petrofac Limited & Anor, Re

At a convening hearing under Part 26A, the court determines notice, jurisdiction, possible roadblocks and class composition. It does not assess the merits or fairness of the restructuring plan, which are matters for sanction.

Notice is fact-sensitive and depends on matters including complexity, urgency, creditor sophistication and prior consultation. Class composition is determined by creditors’ rights, including rights in the relevant alternative and rights conferred by the plan, not by interests. Optional benefits do not create different rights. A class should be fractured only where differences make consultation impossible; materiality is assessed cumulatively and in the context of the overall restructuring.

Petrofac Limited and Petrofac International (UAE) LLC applied for orders convening creditor and member meetings to consider restructuring plans under Part 26A of the Companies Act 2006. The plans formed part of a wider restructuring intended to address severe financial difficulties and avoid group-wide insolvency.

The applications were initially heard on 28 February 2025 and adjourned. At the resumed hearing, several creditor groups opposed aspects of the proposed class structure, particularly the inclusion of the Ad Hoc Group with other senior secured funded creditors. The court also considered notice, jurisdiction, possible roadblocks, sanctioned creditors’ voting rights and beneficial ownership of global notes.

1. Convening jurisdiction. The court’s principal functions were to consider notice, jurisdiction, possible roadblocks and class composition. The merits and fairness of the plans were reserved for the sanction hearing. The court was satisfied that adequate notice had generally been given, taking account of the lengthy and detailed Practice Statement materials, prior notification and the urgency and complexity of the restructuring.
2. Conditions A and B. The Plan Companies had encountered, and were likely to encounter, financial difficulties affecting their ability to continue as going concerns. “Financial difficulties” under section 901A was to be construed broadly. The plans involved sufficient “give and take” and their purpose was to address those difficulties and enable continued trading.
3. International jurisdiction and roadblocks. The court had jurisdiction over the foreign-incorporated Plan Companies because they were liable to be wound up as unregistered companies under the Insolvency Act 1986. Sufficient connection with England and international effectiveness were matters principally for sanction, not jurisdiction at the convening stage. No jurisdictional or other roadblock made it pointless to convene meetings.
4. Class composition. The relevant comparison was the rights creditors would have in the insolvency alternative and the rights conferred by the plans. Rights, rather than interests, were relevant. The senior secured funded creditors had claims of the same ranking, would recover in the same relevant alternative and would receive the same plan treatment. The Ad Hoc Group’s work and backstop benefits were assessed cumulatively. Only 6.9% of its recoveries represented benefits unavailable to the other creditors. That difference was not material, particularly given the work performed and the ability of other creditors to elect for most benefits. There was more to unite than divide the creditors, and the proposed class was not fractured.
5. Other directions. A class could comprise a single member. Sanctioned persons were directed not to vote, subject to the sanction court considering the effect on voting. Beneficial holders of global notes were contingent creditors and could vote, subject to safeguards against double counting. Permission to appeal the class-composition conclusion was refused.