English Court Approves McDermott’s Restructuring Plan in First Restructuring Plan Post-Adler
The English Court has approved the restructuring plan of the McDermott Group.
The plan was opposed by Reficar over an unprecedented six-day sanction hearing, with settlement discussions running in parallel. The Court’s judgment is a comprehensive approval of McDermott’s plan.
In summary, the Court held that:
- the plan company had proved on the balance of probabilities that the relevant alternative to the plan was a worldwide formal liquidation of the Group;
- the “no worse off” condition was satisfied, therefore there was jurisdiction to consider sanctioning the plan despite there being dissenting classes;
- the amount offered to Reficar was sufficient to constitute a “compromise or arrangement”;
- while Reficar’s points in relation to the retention of equity by existing shareholders might have carried some weight in relation to discretion, the offer made to it (see right) meant that the existing equity holders were now being impaired and Reficar would be benefitting from the allocation of substantial equity in the Group; and
- accordingly, the Court would sanction the plan.
This is the first restructuring plan judgment since the Court of Appeal’s landmark decision in Adler, with its revised framework for courts’ discretion when considering whether to bind dissenting classes to a restructuring plan (see our Alert).
McDermott’s restructuring plan will amend and extend the Group’s secured debt and compromise ‘out of the money’ unsecured claims, including a $1.3 billion arbitration award owed to Reficar and $718 million ongoing litigation claim of Contraloria.
The UK restructuring plan is intended to operate in parallel to two Dutch restructuring plans (‘WHOAs’) promulgated by two Dutch companies in the Group, to ensure that the compromise will bind creditors of those companies as a matter of Dutch law. The restructuring plan and the WHOAs are inter-dependent. The WHOAs are expected to be sanctioned mid-March; the voting has taken place and 100% approval has been obtained among the secured creditor classes; Reficar does not oppose the WHOAs. A hearing for recognition of the processes in the U.S. under Chapter 15 of the Bankruptcy Code is scheduled for 22 March.
Kirkland & Ellis advise the McDermott Group.
