Kirkland & Ellis is advising the DeepOcean group on its restructuring via three parallel restructuring plans, including the first “cross-class cram-down” under the new Part 26A of the UK Companies Act 2006.
The group is a leading provider of subsea services to global offshore industries, principally focused on the oil and gas and offshore renewable sectors. The restructuring plans of three English-incorporated entities within the group were sanctioned by the court on 13 January 2021.
The case involves the first use of the new “cross-class cram-down” mechanism, which was introduced in order to facilitate restructurings.
Although 7 out of 8 creditor classes approved the restructuring plans, the requisite consent threshold was not met in respect of the unsecured creditor class in one of the plans. (The 65% consent obtained was not far below the requisite 75%-by-value threshold.) No creditor appeared before the court to oppose confirmation.
A restructuring plan can still be confirmed by the court even where one or more classes do not vote in favour, provided that:
• if the plan is sanctioned, none of the members of the dissenting class would be any worse off than they would be in the event of the “relevant alternative” (i.e. what the court considers would be most likely to occur if the plan were not confirmed); and
• the plan has been approved by at least one class who would have a genuine economic interest in the company in the event of the “relevant alternative”.
The court (Trower J) sanctioned each of the three inter-conditional restructuring plans, holding that the above statutory conditions were satisfied and this was an appropriate case to exercise the court’s discretion to sanction the plans. We will publish further analysis once the court hands down its reasoned judgment.
Other ground-breaking aspects
Solvent wind-down: This is the first time a restructuring plan has been used to facilitate a solvent wind-down, rather than to facilitate a rescue. The court held that the fact the plans would have a mitigating effect on the severity of the losses which the creditors could otherwise sustain was sufficient to satisfy the requisite purpose test under the legislation.
Bar date: The plans also impose a bar date by which plan creditors are required to lodge their claims and provide a mechanism for the adjudication of disputed claims. A bar date was similarly set in the scheme of arrangement of Noble Group (Kirkland represented the group). DeepOcean’s case is the first use of a bar date in the context of a restructuring plan.
This is only the third time that a restructuring plan has been sanctioned, following the introduction of the procedure in June 2020.
Kirkland has advised on all three UK restructuring plans to date. See here for information on Virgin Atlantic’s restructuring plan and here for PizzaExpress.
The Kirkland team is led by restructuring partners Sean Lacey and Robert Sandes and associates Patrick Mackenzie and Leeann Chen, and litigation partner Richard Boynton.