English High Court Reserves Judgment on Petrofac P26A Sanction Hearing9 May 2025 15:35
Justice Marcus Smith today said he would reserve judgment on whether to sanction Petrofac’s two restructuring plans, at the close of a three day hearing on the plans in the English High Court.
Saipem and Samsung opposed the company’s plans, arguing that the plans would unfairly saddle them with Petrofac’s share of the liabilities related to a failed joint venture the three companies had entered into to build Thai Oil’s Clean Fuel Project. Saipem and Samsung also argued that the plans would simultaneously reinstate Petrofac as a competitor in the contractor market, leaving them worse off.
The two dissenting creditors put forward an alternative proposal that they said the Judge, Marcus Smith should consider as the “relevant alternative” to the company plans – which, while still not considered “fair” by Saipem and Samsung, is a deal they are willing to accept and which they argued would leave the restructuring plans unopposed.
Key Arguments
The arguments heard in court rested on three key issues. They were:
1. The relevant alternative, i.e., whether the relevant alternative to consider under the “no worse off” test is a group-wide insolvency, as the plan companies and ad-hoc group contended, or an alternative proposal put forward by Saipem and Samsung;
2. Assuming that the relevant alternative is a group-wide insolvency, whether Saipem, and Samsung would nevertheless be worse off under the plan than under an insolvency; and
3. If, as a matter of fairness, the court could not sanction the plan because it excessively and unfairly enriches other creditors over and above Saipem and Samsung.
Relevant Alternative
Samsung and Saipem contended that the relevant alternative to Petrofac’s restructuring plans is the “open offer” put forward by them to the Plan Companies on April 4. Under the open offer the two dissenting creditors would receive – in addition to the share of the $1 million claims fund already offered to them – a $25 million cash payment by the end of December 2027, additional Tranche 1 warrants worth between $36 million and $45 million, and a small number of additional Tranche 2 warrants of ‘negligible value’.
Representing Saipem and Samsung, Andrew Thornton KC said the alternative plan being proposed was not an entirely new plan, but simply an easy tweak to the existing plan. “We are proposing keyhole surgery,” he said.
He noted that the $25 million cash payment would be paid in the context of a projected operating profit for Petrofac of $300 million in 2027, assuming the restructuring is successful.
Petrofac argued that Saipem and Samsung’s alternative could not be reasonably implemented in the timeframe needed to rescue the company, which is on the brink of collapse. Representing the plan companies, David Allison KC said the plan as it stands was the result of complex negotiations, asserting that the new money investor, Nut Tree Capital Management, would walk away
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