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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Waldorf Production UK PLC, Re [2025] EWHC 2181 (Ch) (19 August 2025) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2025/2181.html Cite as: [2025] EWHC 2181 (Ch), [2025] WLR(D) 447, [2026] Bus LR 37 |
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Neutral Citation Number: [2025] EWHC 2181 (Ch)
Case No: CR-2025-001323
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Date: 19th August 2025
Before :
Mr Justice Hildyard
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Mr. Daniel Bayfield KC and Ms. Charlotte Cooke (instructed by White and Case LLP)
for the Plan Company
Mr. Matthew Abraham and Ms. Annabelle Wang (instructed by Milbank LLP)
for the SteerCo
Mr. Jon Colclough (instructed by Mayer Brown International LLP) for the
Capricorn Companies
Mr. Stefan Ramel (instructed by HMRC) for His Majesty’s Revenue and Customs
Hearing dates: 23 - 24 June 2025
Further written submissions 9 July 2025
Draft circulated 1 August 2025
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APPROVED JUDGMENT
Mr Justice Hildyard:
Introduction
1.
Waldorf
Production
UK Plc (“the Plan Company” or “WPUK”) seeks an order pursuant to sections 901F and 901G of the Companies Act 2006 (“the CA 2006”) sanctioning a restructuring plan (“the Plan” or “the Restructuring Plan”) which is put forward to enable the Plan Company to trade whilst it pursues options for a solvent sale. The Plan is part of an overall restructuring of the group of which the Plan Company forms a part (“the WPUK Group”). The WPUK Group is an oil and gas enterprise engaged in exploration and
production
of oil and gas on the United Kingdom Continental Shelf (“the UKCS”).
2. As the reference above to section 901G of the CA 2006 (“Section 901G”) implies, the Plan Company, which was represented before me by Mr Daniel Bayfield KC leading Ms Charlotte Cooke, now needs and seeks, if the plan is to be sanctioned, an order for cross-class cram down of a dissenting class of its Unsecured Plan Creditors which voted against the Plan at a class meeting held on 12 June 2025 pursuant to a Convening Order dated 5 March 2025.
3. That Convening Order gave permission to the Plan Company to convene two meetings of its creditors, one of the economic owners of bonds (“the Bondholders”) and the other of its Unsecured Plan Creditors, including in particular, Capricorn Energy Plc (“CEPLC”) and Capricorn Energy UK Limited (“CEUK”), which I refer to together as “Capricorn”, [1] and HMRC. Capricorn and HMRC, who each voted against the Plan, now oppose its sanction. Capricorn was represented before me by Mr Jon Colclough; HMRC were represented by Mr Stefan Ramel.
4. The order now sought by the Plan Company is also supported by a steering committee of Bondholders (“the SteerCo”) comprising the beneficial owners of some 84.8% of the Bonds in issue. The SteerCo was represented before me by Mr Matthew Abraham, leading Ms Annabelle Wang.
The Convening Hearing and Judgment
5. This judgment should be read together with the judgment I gave after the Convening Hearing (“the Convening Judgment”), of which the neutral citation number is [2025] EWHC 765 (Ch). In this judgment, except where otherwise specified, I adopt the same definitions as in the Convening Judgment.
6. In the Convening Judgment, I set out in some detail both the background to the Plan and the restructuring of which it forms part, and my reasons for concluding at that stage that the statutory preconditions for giving permission for convening hearings to be held had been satisfied. Although I shall have to revisit certain details of the Plan Company’s financial problems and how they have arisen (since they impact on the
matters
now before me), I shall focus particularly on developments since the Convening Judgment; and, especially, on the results of the class meetings and the issues which arise in consequence of the dissent of the Unsecured Plan Creditors and their sustained objection now.
Structure of this Judgment
7. Accordingly, in this Judgment I consider:
(A) The Plan Company and the WPUK Group in more detail.
(B) The Plan Company’s secured borrowings under the Bonds.
(C) The Plan Company’s unsecured liabilities.
(D) The Plan Company’s financial difficulties.
(E) The development of the Plan.
(F) Key features of the Plan.
(G) Procedural history and the outcomes of the class meetings of creditors.
(H) Statutory preconditions for sanctioning the Plan.
(I) The dispute as to the “the Relevant Alternative” to the Plan and its relevance.
(J) Fairness and the exercise of Discretion.
(K) Application of these principles and my conclusion as to whether or not to sanction the Plan.
(A) The Plan Company and the WPUK Group in more detail
8. The Plan Company is a public limited company incorporated in England and Wales. As to the group of which it is part:
(1) The Plan Company is an indirect subsidiary of
Waldorf
Energy Partners Limited (in administration) (“WEPL”) and
Waldorf
Production
Limited (in administration) (“WPL”).
(2) The Plan Company is the parent company of
Waldorf
Production
North Sea Limited and
Waldorf
Real Estate Limited (“WREL”) (together with the Plan Company, the “WPUK Group”). [2]
(3) The WPUK Group is part of a larger corporate group of which WEPL is the ultimate parent company (the “Group”). The direct and indirect subsidiaries of WEPL, other than members of the WPUK Group are referred to as the “WEF Group”.
9. The Group is an oil and gas enterprise engaged in the exploration and
production
of oil and gas in the UKCS. As indicated above, the Group’s key assets consist of interests held by certain of WPL’s subsidiaries in licences granted by the NSTA which allow them to search and bore for petroleum on the seabed of the UKCS (i.e., the Licences).
10. The Plan Company owns a number of Licence interests, including Licence interest shares in respect of two of the Group’s largest oil-producing assets, being interests in the Kraken Field and the Greater Catcher Area. The Kraken Field is one of the largest subsea heavy-oil field projects in the North Sea, and is considered to have exceptional longevity and reservoir quality. It may also offer additional satellite and infill development opportunities which may provide future drilling targets and revenue (if agreed by joint venture partners). The Greater Catcher Area comprises a hub cluster of three large oil producing fields in the North Sea, namely, the Catcher Field, the Varadero Field and the Burgman Field.
11. A number of the Licences in which the Plan Company holds an interest were originally acquired as part of the sale and purchase of the entire share capital of Capricorn North Sea Limited (now known as WREL) under a sale and purchase agreement originally entered into between WPL and Nautical Petroleum Limited (now trading as Capricorn Energy UK Limited) dated 29 October 2021 (the “Capricorn SPA”).
12. In November 2021, WPL novated its rights and obligations relating to the Capricorn SPA to the Plan Company. WREL then transferred its Licences to the Plan Company as part of a hive-up of WREL’s assets to the Plan Company in February 2022.
13. On 19 December 2023, the Plan Company entered into a settlement agreement with, amongst others, Capricorn, in order fully and finally to settle amounts due and owing under the Capricorn SPA (the “Settlement Agreement”).
14. The Plan Company is party to several key contracts in connection with the Licences in which it holds an interest, including:
(1) joint operating agreements in respect of each Licence, setting out the respective rights, interests, duties and obligations of the Plan Company and each joint venture partner in connection with the joint use of the relevant Licence and the hydrocarbons derived therefrom (the “JOAs”); and
(2) decommissioning security agreements (“DSAs”) pursuant to which the Plan Company and the joint venture partners are required to set aside certain amounts as security (held in a trust arrangement) to meet obligations arising in relation to the decommissioning of a field.
15. The Plan Company has 23 employees (who constitute all of the Group’s employees), leases the Group’s offices in Aberdeen and London and is party to various critical contracts relating to insurance, IT and infrastructure
matters.
(B) The Plan Company’s secured borrowings under the Bonds.
16. The Plan Company has issued:
(1) On 1 October 2021, up to US$300,000,000 of senior secured bonds due September 2025 (the “Original Bonds”); and
(2) On 19 July 2024 and 27 November 2024 respectively:
(a) US$53,706,770 13% of super senior bonds due September 2025 (the “Initial Super Senior Bonds”); and
(b) US$15,000,000 of super senior bonds due September 2025 (the “Company Super Senior Bonds”; together with the Initial Super Senior Bonds the “Super Senior Bonds”; and the Super Senior Bonds together with the Original Bonds, the “Bonds” and the applicable terms, the “Bond Terms”).
17. The Original Bonds are guaranteed by the Plan Company’s direct subsidiary, WREL, and benefit from security including in respect of: (i) the shares in the Plan Company held by its direct parent company,
Waldorf
Acquisition Co. Ltd. (“WACL”); and (ii) the Plan Company’s assets, including, but not limited to, the Plan Company’s shares in its subsidiaries, its key contracts, receivables and bank accounts.
18. The Super Senior Bonds benefit from the guarantee and security described in the previous paragraph and in addition:
(1) The security granted in respect of the Super Senior Bonds ranks in priority to all other debt issued by members of the WEF Group which have granted security for them, including the senior secured bonds issued by
Waldorf
Energy Finance Plc (“WEF”) pursuant to bond terms dated 1 March 2023 and as amended and restated on 18 July 2024 and subsequently waived and amended on 27 November 2024 (the “WEF Bond Terms”) (the “WEF Bonds”). [3]
(2) As at 27 February 2025, the principal amount outstanding of the Original Bonds was US$55,021,352 and of the Super Senior Bonds was US$62,206,770.
(C) The Plan Company’s unsecured liabilities
19. The Plan Company also has unsecured liabilities to be compromised under the Plan as follows:
(1) An estimated liability of US$75,400,000 (estimated up to the Record Time) to HMRC arising under the Energy (Oil and Gas) Profits Levy Act 2022 (the “EPL” and the “2022 Act” respectively) comprising:
(a) a liability of approximately US$3,000,000 to HMRC in respect of EPL accrued by the Plan Company during the calendar year ended 31 December 2022, together with any accrued interest and penalties (the “2022 EPL Liability”);
(b) a liability of approximately US$52,200,000 to HMRC in respect of EPL accrued by the Plan Company during the calendar year ended 31 December 2023, together with any accrued interest and penalties (the “2023 EPL Liability”); and
(c) a liability of approximately US$20,200,000 in respect of EPL accrued during the financial year ended 31 December 2024, together with any accrued interest and penalties (the “2024 EPL Liability” and together with the 2022 EPL Liability and the 2023 EPL Liability, the “EPL Liabilities”).
(2) Liabilities of US$29,500,000 owed to the M&A Creditor comprising:
(a) a liability of US$22,500,000 which became due and payable on 3 January 2025 in respect of an amount owed pursuant to the Settlement Agreement (the “Second Settlement Amount”); and
(b) a liability of US$7,000,000 which became due and payable on 15 May 2025 pursuant to the Settlement Agreement (such sum becoming payable on the basis that a sale transaction in respect of the transfer of the Plan Company’s interest in the Columbus Field (which was subject to certain conditions precedent outside the Plan Company’s control) did not complete by 31 March 2025) (the “Columbus Settlement Amount”; together with the Second Settlement Amount, the “M&A Liabilities”).
20. The Plan Company also has certain other unsecured liabilities, including the following:
(1) net intercompany liabilities which at 27 February 2025 totalled US$60,446,551 owed to WACL and US$451,739,400.43 owed to WREL. These liabilities are to be waived or released as explained below; and
(2) certain liabilities the payment of which is critical to the ongoing operation of the business, including liabilities under the JOAs and DSAs, under software licences and under employment contracts and liabilities for adviser fees. These amounts will be paid in the ordinary course of business and are not affected by the Plan. There has been no suggestion from the Opposing Creditors that this is not justified.
(D) The Plan Company’s financial difficulties
21. In his first witness statement on behalf of the Plan Company dated 27 February 2025, Mr Paul Tanner (“Mr Tanner”, who was at the time of his first witness statement the general counsel and commercial director of the Plan Company but who, since the resignation of the Plan Company’s three main directors in May 2025, is now its CEO) divides the development of the Plan Company’s financial difficulties into two phases: (a) a phase from May 2022 to July 2024 which culminated in “the July Refinancing” which I explain below; and (b) a phase from July 2024 to the present, culminating in the Plan presently under consideration.
(a) May 2022 to July 2024
22. Mr Tanner has identified, “from discussions I have had with the Plan Company’s other directors and management”, three main reasons for the financial difficulties which led to serious liquidity issues by the first quarter of 2024. These are as follows:
(1) the introduction in May 2022 and subsequent extension of the EPL (often referred to as the “windfall profits tax”);
(2) what he refers to as “the overall debt maturity profile of the Plan Company”; and
(3) the withdrawal of (and inability to replace) certain third-party funding.
23. The EPL was a new tax on the profits of oil and gas companies operating in the UK and the UKCS which was introduced in May 2022, and imposed (at that time) an additional 25% levy on profits arising on or after 26 May 2022.
24. The EPL was initially presented as a temporary measure with a ‘sunset clause’ providing for it to fall away on 31 December 2025. When it was introduced, the EPL made provision for a generous allowance to incentivise investment, permitting relevant companies to deduct 80% of their capital expenditure and some operating and leasing expenditure from profits subject to the levy.
25. However, in November 2022, it was announced that the levy was to increase to 35% and the period during which the EPL would apply was extended to 31 March 2028. Then, in November 2024, the rate was increased again (to 38%) for profits accrued after 1 November 2024 and the regime was further extended until 31 March 2030.
26. Mr Tanner also explains that, prior to the introduction of the EPL, the Plan Company’s expectation was that its material corporation tax losses would provide a shield for tax on profits from its field interests; but that, although these losses have indeed meant that corporation tax has not been payable by the Plan Company, the EPL is charged on profits before the offset of corporation tax losses, and the Plan Company is exposed to them without deduction for previous losses accordingly.
27. The Plan Company submitted that the pressure that the EPL regime placed on the Plan Company and the Group was exacerbated by the fact that its introduction post-dated the Plan Company’s entry into the Capricorn SPA and the various increases and extensions of the EPL taking effect after the acquisition of the share capital of several Licence-holding Group companies. These acquisition agreements involved the payments of certain deferred and/or contingent consideration which was calculated without accounting for the implementation of (let alone subsequent increases in) the EPL.
28. To add to the Group’s financial difficulties, in April 2024 the Group was notified that certain third-party working capital arrangements which enabled the Group to discount receivables under arrangements with the off-taker of its petroleum would be withdrawn in May 2024 due to, amongst other factors, internal investment restrictions of the third-party financier. Mr Tanner’s evidence, which was not contradicted, is that such funding had been critical to cashflow and the maintenance of sufficient working capital throughout the Group. Despite the Plan Company (and other Group entities) pursuing negotiations with several other third-party financiers, it did not prove possible to replace those funding arrangements.
29. The Plan Company submits that it was as a result of these liquidity issues that on 3 June 2024:
(1) the Plan Company and WEF failed to comply with their covenant to deliver to the Bond Trustee their annual financial statements for 2023 by the end of the applicable remedy period under the Bond Terms and the WEF Bond Terms, respectively; and
(2) WEF failed to make certain amortisation and interest payments when due and to satisfy the liquidity covenant under the WEF Bond Terms.
30. On 4 June 2024, the directors of WEPL and WPL (the Plan Company’s ultimate parent companies) resolved to appoint administrators. James Tucker, David Pike and Alistair McAlinden of Interpath Ltd (“Interpath”) were appointed as administrators of WEPL on 4 June 2024 and James Tucker, David Pike and Luke Wiseman of Interpath were appointed as administrators of WPL on 12 June 2024 (together, the “Administrators”).
31. The purpose of the Administrators’ appointments was to provide a stable platform at parent company level in order to allow the subsidiaries to continue trading and maintain their going concern value and allow the Administrators to run a sale process in respect of WPL’s shares in its subsidiaries (the “Sales Process”).
32. On 28 June 2024, the Group agreed a “time-to-pay” (“TTP”) arrangement with HMRC (the “TTP Arrangement”) in respect of its EPL and certain corporation tax liabilities arising from the financial year ended 2022 which allowed payment in a number of monthly instalments, all of which have now been made.
33. On 18 July 2024, the members of the Group and certain holders of the WEF Bonds completed the implementation of a refinancing of the Bonds and the WEF Bonds (the “July Refinancing”) to (amongst other things):
(1) implement the transfer of the Original Bonds from their prior holders to the SteerCo and the further transfer of certain of the Original Bonds held by the SteerCo to other holders of the WEF Bonds;
(2) extend the maturity of the Original Bonds to 2 September 2025;
(3) defer and roll-up all amortisation payments arising pursuant to the terms of the Original Bonds to the new maturity date, thereby providing the Plan Company with improved liquidity headroom;
(4) provide an injection of new money by the SteerCo and certain other holders of the WEF Bonds of approximately US$23,000,000, via the issue of the Super Senior Bonds to stabilise the liquidity position of the Group (including funding payments due under the TTP Arrangement) and establish a stable platform to commence the Sales Process;
(5) implement a roll up on a cashless basis of a certain portion of WEF Bonds into the Super Senior Bonds;
(6) implement a forbearance and standstill arrangement in respect of the pre-existing Events of Default under the terms of the WEF Bond Terms and agree certain undertakings on behalf of WEF and the guarantors pursuant to the WEF Bond Terms; and
(7) enter into: (i) on 18 July 2024, an amendment and restatement agreement to effect certain amendments to the WEF Bond Terms; and (ii) on 1 July 2024, an amendment and restatement agreement to effect certain amendments to the Bond Terms and waive all pre-existing Events of Default thereunder.
34. The Plan Company’s position is that the TTP Arrangement and the July Refinancing stabilised the financial position of the Plan Company and the broader Group, allowing the Administrators to run the Sales Process and the Plan Company and the wider Group to commence substantive discussions with the SteerCo to explore long-term solutions to the unsustainable maturity profile and capital structure of the Group’s borrowings.
(b) Second half of 2024 onwards
35. However, in the second half of 2024:
(1) oil prices decreased significantly, which adversely impacted the Group’s anticipated revenue. While the Plan Company was party to a hedging arrangement which provided some protection against the risks associated with the fluctuation in oil prices, this protection was only partial and only covered the period to 31 December 2024;
(2) the Group faced certain operational difficulties, including delays in start-ups from planned shutdowns of certain assets, with a consequential impact on revenue; and
(3) the annual postings required under the DSAs across the Group were higher than anticipated due to various factors including increased estimates in respect of abandonment costs for certain fields being greater than expected and other macro assumptions.
36. Mr Tanner’s evidence is that it was in order to be able to fund certain of these postings that, on 27 November 2024, the Plan Company lent US$15,000,000 to WCNS(I), a key operating member of the Group (the “Intra-Group Loan”), but an entity in which the Plan Company itself had and has no interest. According to Mr Tanner, the directors of the Plan Company considered that the provision of the Intra-Group Loan was essential to prevent any destabilising effect that a failure by WCNS(I) and certain other members of the WEF Group to comply with their obligations pursuant to DSAs might have had on the Plan Company.
37. Further, in connection with the Intra-Group Loan, the Plan Company issued and subscribed for the Company Super Senior Bonds (which are subject to certain undertakings given by the Plan Company, including with respect to the nature of its vote on any resolution, decision or action taken under relevant intercreditor arrangements or in any scheme or restructuring plan pursuant to Part 26 or Part 26A of the CA 2006 (the “Voting Undertaking”)). This gave the Plan Company a pro rata share of the super senior secured claims under the Super Senior Bonds against certain members of the WEF Group.
38. The Intra-Group Loan was utilised by WCNS(I) directly and subsequently on-lent in part to certain other members of the WEF Group. On 3 December 2024, WCNS(I) elected voluntarily to prepay a portion of the Intra-Group Loan amounting to US$2.5 million to the Plan Company. On 12 February 2025, WCNS(I) elected to voluntarily prepay a further US$4 million of the Intra-Group Loan to WPUK. Upon receipt of such amounts, the Plan Company cancelled a corresponding amount of Company Super Senior Bonds with the effect (as acknowledged by Mr Tanner) of reducing pro rata the Plan Company’s secured claim against certain members of the WEF Group.
39. This left US$8.5 million of the original principal amount outstanding. The loan had a repayment backstop date of 30 June 2025. WCNS(I), being a Scottish company, is seeking sanction of its own restructuring plan in the Scottish Court. Its liabilities (some US$125 million) to its bondholders and to HMRC in respect of EPL (some US$84 million) are quite similar to the Plan Company’s figures, though in WCNS(I)’s plan a lower payment to HMRC of 2% is proposed (a
matter
to which I return later). I am unsure what (if any) part of WCNS(I)’s indebtedness to the Plan Company is proposed to be paid to the Plan Company.
40. Mr Tanner has sought to justify this Intra-Group Loan (effectively on a super-senior basis) as being essential in order to prevent defaults by WCNS(I), which he describes as “a key operating member of the Group”, and to stabilise the Group as a whole “to the benefit of the Plan Company.” Again, it is not appropriate to determine the propriety of the Intra-Group Loan as part of this hearing: but the effect on the Plan Company has been further to erode its financial position.
41. To return to the chronological sequence, the Administrators informed the Plan Company in mid-December 2024 that the initial stage of the Sales Process had concluded and that they had received no offers for the Plan Company that were considered implementable or acceptable to the SteerCo, due at least in part to the concerns of prospective bidders as to the overall debt profile of the Plan Company.
42. The Second Settlement Amount fell due on 3 January 2025 but was not paid.
43. In parallel with the Sales Process, the Plan Company, together with its financial and legal advisers, considered potential alternative long-term solutions for the Plan Company, such as a financial restructuring.
44. Mr Tanner’s evidence is that it was following the update received from the Administrators regarding the outcome of the Sales Process in December 2024, that the Plan Company and its legal advisers and financial advisers accelerated preparation for and negotiations in respect of a restructuring.
45. Before turning to these negotiations, which took place with the Plan Company’s Bondholders without any engagement of any kind with the Plan Company’s two Unsecured Plan Creditors, I should address two major omissions from the description given above of the reasons for its financial difficulties.
(c) Other reasons for the Plan Company’s financial difficulties
46. Airbrushed out of the description above, based on Mr Tanner’s first witness statement, of the financial difficulties which have led to the proposal of the Plan and the restructuring of which it forms a part are two further
matters
which must have materially impacted the ability of the Plan Company and the Group to meet its liabilities. These are:
(1) the declaration and payment by the Plan Company of a dividend of US$76 million by reference to management accounts (which were subsequently shown to have important omissions), which was passed up the corporate chain, eventually resulting in a payment of c. US$70 million to the shareholders in the Group’s ultimate parent company, who included two of the Plan Company’s then directors (Mr Erik Brodahl and Mr Jon Bard Skabo) (“the October 2022 Dividend”);
(2) the effect on the Plan Company of the July Refinancing, in particular its effect of increasing the total secured indebtedness of the Plan Company from c. US$52 million to c. US$108 million.
47. The dividend of US$76 million was paid approximately four months after the announcement and introduction of the EPL by reference, not to audited year end accounts, but on the basis of management accounts that apparently showed distributable profits of US$250 million. Mr Tanner has explained in his second witness statement, dated 5 June 2025 (by which time three of the directors responsible for the dividend (Messrs Brodahl, who was CEO, Skabo, who was Chief of Staff, and Aaditya Chintalapati, who was Chief Financial Officer) had retired and he had become CEO) that the management accounts were reviewed by an external accountancy firm. However, Mr Tanner accepts that “with the benefit of hindsight, it appears that there were various omissions from the August 2022 Management Accounts that should have been included for the purposes of calculating the distributable reserves. As a consequence, the Plan Company had lower distributable reserves available when the October 2022 Dividend was declared and paid…”
48. In fact, the 2022 Audited Accounts included a negative figure for distributable reserves of c. US$362.11 million (inclusive of the payment of the October 2022 dividend). Mr Tanner goes on to explain that “a certain proportion of the delta [i.e. the difference between the two sets of accounts] was as a result of liabilities arising after the October 2022 dividend was declared and paid…” (and he instances the November 2022 increase to 35% in the rate of the EPL). However, he accepts that “there were other amounts, most notably the EPL, which should plainly have been accounted for in the August 2022 Management Accounts.”
49. It is not within the proper scope of this judgment, and a sanctions hearing is not the appropriate occasion, to determine the propriety of the October 2022 Dividend. What for present purposes is clear is the basic fact that the payment of that dividend materially eroded the financial position of the Plan Company and deprived it of resources to meet its liabilities. The fact, much relied on by Mr Tanner, that (a) even after adjusting for all potential omissions in the August 2022 Management Accounts, the Plan Company would still have had distributable reserves at the relevant time of US$78.2 million, i.e., sufficient reserves to declare and pay the October 2022 Dividend, and (b) the Group paid Capricorn c. US$190 million in accordance with its contractual obligations following the payment of the October 2022 Dividend, may bear on any issue of propriety; but neither consideration affects the more basic fact that the Plan Company’s financial position was materially compromised, and is at the root of the Plan Company’s present problems.
50. As to the Plan Company’s additional indebtedness of US$56 million resulting from the July Refinancing, Mr Jon Colclough, in his skeleton argument on behalf of Capricorn, broke down the constituent elements explaining the increase as follows:
(1) approximately US$3 million in respect of fees and an original issue discount on the bonds issues at that time;
(2) US$23 million of new money lent to the Plan Company by the Bondholders;
(3) US$30 million, described by Mr Tanner in his first witness statement as “a roll up on a cashless basis of a certain proportion of WEF Bonds into the Super Senior Bonds”. Putting the effect less euphemistically, this amounted to certain Bondholders swapping US$30 million of bonds issued by a company called WEF (another company in the Group owned by the Plan Company’s ultimate parent but in which the Plan Company had and has no interest) and the Plan Company thereby assuming US$30 million of liabilities previously owed by WEF.
(E) The development of the Plan
51. The Plan Company had been considering the possibility of a restructuring plan in parallel with the Sales Process from about late summer of 2024. After the Administrators had informed the Plan Company in mid-December 2024 that the initial stage of the Sales Process had not resulted in any acceptable offers (see paragraph [39] above), the Plan Company and its advisers entered into accelerated discussions with its Bondholders through the SteerCo and their advisers to develop a full restructuring plan to avoid a near-term liquidity shortfall and enable the Plan Company to trade whilst it pursues a solvent sale on a stable platform.
52. On 5 February 2025, after an extended period of negotiation with the SteerCo and its financial and legal advisers, the Plan Company:
(1) agreed in principle with the members of the SteerCo (who collectively represent 84% of the Bonds (comprising 83% of the Original Bonds and 86% of the Super Senior Bonds, excluding the Company Super Senior Bonds)) the terms of a restructuring (the “Restructuring”) [4];
(2) entered into a lock up agreement (the “Lock-Up Agreement”) with the members of the SteerCo pursuant to which they agreed, amongst other things and subject to certain conditions: (a) to take all steps reasonably necessary to support, facilitate, implement, consummate or otherwise give effect to the Restructuring by no later than the longstop date (being 2 May 2025); and (b) in the case of the participating Bondholders who are Plan Creditors: (i) to attend the relevant Plan Meeting in person or by proxy and vote in favour of the Restructuring Plan; and (ii) not to take any enforcement action in connection with the Bonds or the guarantees provided thereunder, subject to customary limited carve-outs; and
(3) launched the Plan, issuing the practice statement letter (“PSL”) on the same date (5 February 2025).
53. No such process of engagement and negotiation was undertaken by the Plan Company with its Unsecured Plan Creditors prior to 5 February 2025. The terms of the Plan represent the outcome of the Plan Company’s negotiations and ultimate agreement with the SteerCo. Neither of the Unsecured Plan Creditors had any involvement in the development of the Plan or the wider Restructuring.
54. In Mr Bayfield’s skeleton argument for the Sanction Hearing, which is based (in relevant part) on Mr Tanner’s second witness statement, it is stated that “throughout January 2025, the Plan Company communicated (either on its own behalf, or via its solicitors White & Case LLP (“White & Case”) with Capricorn and/or its solicitors Mayer Brown LLP (Mayer Brown”)”.
55. It is stated also in Mr Tanner’s second witness statement that in January 2025, DC Advisory (“DCA”) (in its capacity as adviser to the Bondholders) communicated the proposed terms of the Restructuring to Capricorn and engaged in further discussions with Capricorn on those terms and the financial position of the Plan Company; and that it was following these discussions, on 24 January 2025 Capricorn agreed not to issue a winding-up petition without advance notice to the Plan Company.
56. However, if thereby it is sought to be implied that there was engagement with Capricorn in formulating the Restructuring that would be incorrect, as the exhibited correspondence for January 2025 makes clear. As was submitted on behalf of Capricorn, the correspondence makes the picture “even more unfortunate because CEPLC was seeking to engage with the Plan Company and had invited the making of proposals.”
57. I accept as accurate the following summary set out in Mr Colclough’s skeleton argument, though I have also referred to the correspondence for the purpose of supplying some qualifying nuances:
(1) On 3 January 2025, the date on which the Plan Company was due to pay $22.5 million to Capricorn, Mr Tanner of the Plan Company telephoned Mr Paul Ervine (“Mr Ervine”, Capricorn’s Group General Counsel and Company Secretary) and said that payment would not be made because “the Plan Company intended to prioritise operational costs”. Mr Tanner did not mention that since December 2024 the Plan Company had been and remained engaged in what Mr Tanner describes in his first witness statement as “an extended period of engagement and negotiation” and “concerted and accelerated discussions” with the SteerCo and its legal advisers, the objective of which was to reach terms for a restructuring arrangement with a view to compromising the debts owed to Capricorn and HMRC.
(2) On 7 January 2025, Capricorn’s Chief Executive Officer, Mr Randy Neely (“Mr Neely”) wrote to the Plan Company concerning the Plan Company’s continuing failure to pay the Second Settlement Amount. He complained that “no proposal or an attempt at resolution has been received from your company regarding this unpaid amount ”. He invited the Plan Company to make a proposal for full payment “or at the very least, an acceptable solution”, threatening a winding-up petition in default. The Plan Company was invited to make a proposal but did not do so, except (by letter dated 13 January 2025) to extend, in the context of asking Capricorn to “refrain from taking hasty steps such as the presentation of a winding-up petition…” a rather Delphic invitation to Capricorn “to speak to us separately on a without prejudice basis, with the aim of sharing information and framing a discussion on the way forward” .
(3) On 15 January 2025, Capricorn’s solicitors (Mayer Brown International LLP (“Mayer Brown”)) wrote to the Plan Company providing “a final opportunity to propose a settlement plan…to avoid formal proceedings being issued”. The only response was a phone call from the Plan Company referring to an unexplained “solution”.
(4) After Capricorn’s solicitors had written to the Plan Company’s solicitors (White & Case LLP (“White & Case”)) on 17 January 2025 noting that no proposal had been made, it appears (from a further letter from Mayer Brown to White & Case dated 23 January 2025) that some discussion took place between Capricorn and the SteerCo’s advisers, DCA, in which DCA had committed to providing a “sensible written proposal” on or before 24 January 2025.
(5) No written proposal was put forward within the time specified; but on 24 January 2025, White & Case wrote to Mayer Brown stating that the Plan Company intended to launch a restructuring plan and threatened an application to injunct the presentation of a winding up petition on the basis that such a step “will be jeopardising an alternative which would offer a better outcome for all classes of creditors”. On the same day, Capricorn’s solicitors responded confirming that a petition would not be presented with less than 72 hours’ notice and stating:
“In view of Capricorn's efforts to seek engagement from your client, including by way of our letters of 15, 17 and 23 January 2025, it is inappropriately last minute to demand an undertaking by the end of the day, especially so when you have presumably been aware of present
matters
for over two weeks. Our client has clearly expressed that it has been, and remains open, to sensible commercial negotiations with WPUK and its advisors.” (Emphasis added)
(6) The substance of the Plan was communicated to Capricorn on 24 January 2025 by DCA, followed, on 5 February 2025, by the launch of the PSL. By that time, some 95.8% (by value) of the Bondholders had already executed or acceded to a Lock-Up Agreement committing them to support the Plan.
(7) On 4 February 2025, Mayer Brown sent a letter to White & Case indicating disappointment with the Plan, both as to its apparent unfairness and lack of detail and transparency, and also because it appeared to have been developed without proper regard or provision for various transactions which might be susceptible to challenge in an insolvency.
(8) White & Case’s reply dated 12 February 2025 refuted any criticism of the transactions of concern to Capricorn and, under a heading “Restructuring”, declined to provide further information until Capricorn “has had sufficient time to review and consider the PSL” unless Capricorn had “specific questions now that are not adequately addressed in the PSL or this letter and that are sufficiently urgent as to require an answer before the Explanatory Statement…”. The clear impression that this gave was that further engagement would not be entertained except in respect of defects in the Plan or the accompanying documentation required.
58. As set out in a letter sent to White & Case on behalf of Capricorn by Mayer Brown on 21 February 2025:
“Save for very limited discussions as between the Bondholders' financial advisers, WPUK itself has not approached Capricorn to ask whether it would consider a compromise of its debt. We do not understand why this has not been done.
For the avoidance of doubt, our client is willing to enter into settlement discussions with WPUK and will take a commercial and realistic view of the position.
In the event that WPUK does not agree to enter into discussions, or does not engage substantively with Capricorn, Capricorn will contend at sanction that: (i) an alternative deal, rather than a formal insolvency, is the relevant alternative; and (ii) as a
matter
of discretion, the Court should not sanction a plan where the Bondholders are seeking to cram down the unsecured creditors for their own benefit without seriously engaging in discussions about a fair share of the restructuring surplus.”
59. There were no further discussions between Capricorn and the Plan Company prior to 27 February 2025, when the Plan Company issued its claim seeking an order pursuant to section 901C of CA 2006 convening meetings of plan creditors to consider and approve the Plan.
60. Thus, I accept Mr Ervine’s evidence that, as regards Capricorn:
“[t]he Plan Company launched the Plan without even attempting to properly negotiate a settlement - notwithstanding the fact that we had made it clear on several occasions that we were open to discussing a compromise”.
61. The Plan Company’s engagement with HMRC prior to 27 February 2025 was similarly exiguous. Further, it is, in my view, clear from the evidence that the Plan Company’s then management (which was replaced in May 2025) never made any provision for timeous payment of EPL, engaged in transactions which in the result made it impossible for it to meet its EPL liabilities in respect of the 2023 and 2024 financial years, and never intended to disclose to HMRC the Plan until after its announcement whilst continuing to owe accrued liabilities in respect of EPL which it intended to “cram down” rather than pay.
62. The history of the Plan Company’s dealings with HMRC in respect of its tax affairs (including its liability to pay Corporation Tax and EPL) prior to 27 February 2025 is disturbing. I have the following in mind in particular:
(1) It was four months after the much-publicised introduction of EPL (on 26 May 2022) as a surcharge on the extraordinary trading profits of the oil and gas sector in the wake of the considerable increase of oil and gas prices following Russia’s invasion of Ukraine that the Plan Company’s then directors made their decision to pay an interim dividend of US$76 million on 4 October 2022 by reference to management accounts containing a series of later-revealed errors (see further as to this paragraph [47] above).
(2) The normal due and payable date for Corporation Tax (“CT”) is nine months and one day after the end date of the accounting period (“APE”, being 31 December in this case). Although EPL is a separate tax (so that a business cannot, for example, use losses in respect of CT as an offset against EPL) it is due and payable at the same time as CT. The Plan Company’s CT liability for 2022 was not, therefore, yet due and payable at the date of the $76 million interim dividend: but the Plan Company’s prospective liability to pay EPL without any set off of losses for CT purposes should have been, but was not, provided for in management accounts by reference to which the dividend was approved.
(3) WPUK failed to make payment of its CT liability for APE 2022 when due and payable on 1 October 2023. Nor did it file its CT return by the deadline of 31 December 2023. No one at WPUK or any
Waldorf
company made any contact with HMRC with regard to these outstanding liabilities of (across the Group) some £40,844,467.29 (including some £29,129,225 in the case of the Plan Company until 13 June 2024, after the directors of WEPL and WPL had resolved to appoint Administrators).
(4) On that date, Aaditya Chintalapati, WPL’s CFO, put forward a TTP proposal of 12 monthly instalments starting in June 2024. Although the TTP proposal was submitted almost 18 months after the end of the relevant APE and nine months after the CT was due and payable, HMRC ultimately accepted it.
(5) In the event, the instalments due under the TTP Arrangement were paid and the required Quantification Notices in respect of payments of EPL were received by HMRC timeously.
(6) However, during this time the CT and EPL liability for APE 31 December 2023 became payable on 1 October 2024. No payments were made, nor was the relevant tax return filed. Nor did the Plan Company or the Group make any further TTP request, or any further proposal to HMRC (whether for another TTP arrangement or otherwise) at any time prior to February 2025.
(7) Furthermore, at no stage in that period, and until receipt by HMRC of the Plan Company’s PSL on 5 February 2025 was any mention made to HMRC by the Plan Company (or any Group company) of any proposed restructuring plan, which (according to Mr Tanner’s first witness statement) the Plan Company “had been progressing in the background since the late summer 2024” (only very shortly after the TTP Arrangement which was made in relation to 2022 liabilities).
(8) The only explanations offered for this failure by Mr Tanner on behalf of the Plan Company in his written evidence are that:
(a) “the Plan Company’s understanding based on advice received from its legal, tax and financial advisors was that HMRC could not agree to a write-down of debt owed to it outside the confines of a Court-sanctioned restructuring process. Agreeing a consensual deal with HMRC was therefore not considered a viable option”;
(b) at the time of agreeing the June 2024 TTP, “HMRC made clear to the Plan Company that if the Group were to seek additional TTP arrangements in the future, HMRC would require stakeholders in the Group to have taken material steps to assist with the relevant payments first”; and
(c) “In any event, and most fundamentally, even if the Plan Company had approached HMRC regarding a further TTP before issuing the Plan, I do not consider that this would have been sufficient for the Plan Company as any TTP arrangement would only have extended the date for payment and would not have reduced the quantum of the liability itself, meaning the underlying issue of liquidity is not solved. In light of the financial pressures facing the Plan Company, extending the payment date for the EPL would not have been a practical solution, regardless of whether HMRC would have agreed to it or not.”
(9) Mr Tanner added in the course of his cross-examination by Mr Ramel on behalf of HMRC that:
“… We needed to reach agreement with the Bondholders on what a restructuring plan would look like before talking to HMRC, so we were not in a position to talk to HMRC because we did not know what the plan would look like.”
(10) None of the explanations offered seems to me to carry conviction. There was never anything to stop the Plan Company approaching HMRC and seeking some sort of accommodation; nor did Mr Tanner suggest any downside in doing so. His suggestion that such was the state of the Plan Company that a TTP arrangement would have been futile is no cogent reason for not sounding out HMRC’s view as what might be done in contemplation or indeed in the context of a restructuring plan. It is to be noted that no documentary or other corroboration was put forward for any of Mr Tanner’s reasons for not approaching HMRC; nor did the Plan Company produce for the Court any cash-flow forecasts in support either.
63. Unsurprisingly, but not convincingly, Mr Tanner rejected the suggestion put to him in cross-examination that the real reason that no attempt was made to contact HMRC was that it was simply not thought necessary because of the offer of 5% in circumstances where HMRC’s claims were “out of the money” or “under water” in the “Relevant Alternative” (see below). Mr Ramel submitted in his oral closing that it is “pretty obvious” that this was indeed the reason; and I would accept HMRC’s submission that “this plan has all the hallmarks of that.”
64. More generally, it is, in my view, clear from the evidence that the Plan Company’s directors (at least until the changes in the Board in May 2025) not only conducted its financial affairs almost entirely without regard to its EPL liabilities except for the purpose of blaming the regime (rather than the profligate US$76 million dividend) for its liquidity problems, but also sought to keep from HMRC its planned Restructuring, whilst continuing to accrue substantial liabilities to CT and EPL which on its own assessment it would not be able to meet.
65. As to the position after 27 February 2025, there were exchanges between the Unsecured Plan Creditors, but these exchanges were, as it seems to me, more with a view to:
(1) in the case of Capricorn and HMRC, establishing a precise proposal of sufficient certainty and definition to avoid being dismissed as inchoate, and pitched at an acceptable uplift for them over the present proposal whilst still leaving the Bondholders with more than they would get in an administration or liquidation, and
(2) in the case of the Plan Company, the Bondholders and the SteerCo, emphasising the unaffordability of the proposal, its excessiveness in comparison to the minimal returns that Capricorn and HMRC could expect in an administration or liquidation, and the obdurate stance on the part of Capricorn and HMRC and the futility of any negotiation which (they suggested) its definitive nature revealed.
66. Further, the overall message which was conveyed by the Plan Company and the SteerCo has been that it is all too late anyway: if the proposed Plan is not successfully accomplished, there is a serious risk that other participants in the Plan Company’s oil and gas ventures will call time and opportunistically seek to assert forfeiture rights.
67. In summary, in the post-PSL period, there has not been any meaningful engagement, still less any real negotiations, much as, in the period prior to the PSL, there was no engagement nor any negotiation at all.
68. I return later to discuss the relevance of this to (a) the identification of the Relevant Alternative (see paragraphs [89] to [134]) and (b) the overall issue of fairness (see paragraphs [135] to [164]).
(F) Key Features of the Plan
69. The key features of the proposed Restructuring are as follows:
(1) The Bond Terms to be amended as detailed in paragraph [70] below.
(2) The Unsecured Liabilities to be compromised in exchange for a cash payment of 5% of the amount thereof and the contingent upside-sharing payments explained in the following sub-paragraph.
(3) Each Unsecured Plan Creditor to be entitled to receive contingent upside-sharing payments in an amount pro rata to, and capped at, the principal amount of their Plan Claims in certain circumstances (as detailed in paragraph 5.4(d)-(e) of the Explanatory Statement).
(4) The net intercompany liabilities owed by the Plan Company to WACL and WREL (referred to in paragraph [20(1)] above) to be waived and released in full.
(5) Any other intra-Group claims owing by the Plan Company to be waived and released, discharged by way of set-off, and/or compromised.
(6) Any amounts outstanding under the Intra-Group Loan to be repaid in full three months prior to the maturity of the Super Senior Bonds (and the remaining Company Super Senior Bonds to be cancelled in accordance with, and subject to, the terms of the Voting Undertaking and the Bond Terms), provided that the Plan (and WCNS(I) plan) are sanctioned and the maturity of the Super Senior Bonds is extended by the terms contemplated in the Plan.
70. In summary, the proposed amendments to the Bonds are as follows:
(1) the maturity date of the Bonds to be extended to 31 May 2027;
(2) cash-pay interest to continue to be payable at a rate of 13% per annum, quarterly in arrears;
(3) the Super Senior Bonds and the Original Bonds to maintain their current security and guarantee position (with such guarantees to be reconfirmed, and security to be supplemented and reconfirmed, as reasonably required);
(4) the minimum liquidity covenant to be amended so that the aggregate amount of any cash and cash equivalent investments required to be held by the Plan Company and its subsidiaries shall be no less than US$10 million (as tested on the last day of each calendar month);
(5) a covenant to apply, requiring the Plan Company to comply with a sale protocol and governance agreement, to which the Plan Company, WACL,
Waldorf
Holdco Limited and the Bond Trustee are to be party, and any breach of such agreement to be an Event of Default under the Bond Terms (unless remedied within 20 Business Days);
(6) a new mandatory early redemption mechanic to be introduced whereby any cash held by the Plan Company and its subsidiaries in their bank accounts in excess of the amount equal to the sum of US$30,000,000 plus (i) the “Decommissioning Allowance” [5]; and (ii) the “EPL Allowance” [6] as at the end of the relevant quarter, is to be applied within ten Business Days in mandatory early redemption of the Bonds;
(7) the existing call premium mechanic (which amongst other things provided for the Bonds to be redeemed at a fixed price of 106% upon a change of control) to be replaced with a new call premium mechanic which is dependent on oil prices and applies only to the excess cash sweep; and
(8) the Plan Company to be entitled to incur up to US$10 million of indebtedness, through a tap issuance of the Bonds, ranking in priority to the Bonds with respect both to payment and to guarantees and security (“Super Priority Debt”), subject to certain conditions. [7]
71. The implementation of the Restructuring is conditional on confirmatory amendments (replicating the amendments described in the previous paragraph) of the Bond Terms being passed by the requisite majority of Bondholders (i.e., two thirds by value of the outstanding Bonds voting, less any Company Super Senior Bonds or other Bonds held by the Plan Company or any of its affiliates, on a minimum quorum of 50% by value of such outstanding Bonds) (the “Confirmatory Amendments”). Mr Lars Erik Laerum, who is a Director of the Bond Trustee (Nordic Trustees AS), has confirmed in his second witness statement (dated 16 June 2025) that the requisite majority of Bondholders gave their consent to approve the amendments, waivers and consents requested. The Bond Trustee is therefore authorised and instructed to effect the requested amendments, waivers and consents in the event that, among other things, the Plan is sanctioned by this Court and takes effect.
(G) Procedural history and the outcomes of the class meetings of creditors
72. In accordance with paragraph 7 of the Convening Order, the Plan, the Explanatory Statement and the Bondholder Plan Creditor Letter were made available on 7 March 2025 to: (i) the Bondholders to download from the Plan Website (noting that each Bondholder that has created an account on the Plan Website received an automatic notification to their email inbox informing them that such documents were available for download on the Plan Website); and (ii) the Unsecured Plan Creditors via email.
73. On 28 May 2025, the Plan Company issued a Supplementary Explanatory Statement and the Bond Trustee published it on Stamdata and the Clearing System and the Plan Website. On the same day White & Case also provided the Supplementary Explanatory Statement to the Unsecured Plan Creditors, together with a redline of the Deed of Release, a redline of the Plan Document, a redline of the Amendment and Restatement Agreement and the Supplemental Relevant Alternative Report.
74. The Supplementary Explanatory Statement explained (amongst other things) that:
(1) the Deed of Release had been amended to address a concern raised by Capricorn in relation to the scope of the releases vis-à-vis Connected Parties; [8]
(2) the definition of M&A Creditor had been amended to refer to both CEPLC and CEUK to address a concern that CEUK could claim that part or all of the M&A Liabilities are owed to it (and not CEPLC);
(3) the Plan Company had received a letter dated 16 May 2025 sent jointly on behalf of HMRC and Capricorn (the “Joint Letter”), which proposed an amended restructuring plan (see section 5 of the Supplemental Explanatory Statement). This is addressed further in section I of this Judgment below;
(4) the longstop date under the Lock-Up Agreement had been extended to ensure that it fell suitably after the new Sanction Hearing date, and the Longstop Date under the Plan had also been extended; and
(5) the macroeconomic environment for companies operating in the oil and gas sector had been subject to considerable volatility during 2025 and, in particular, since the Explanatory Statement was issued, which could impact the valuation of the Plan Company.
75. The Plan Meetings were subsequently convened in the manner directed by the Convening Order.
76. The results of the voting at those Plan Meetings can be summarised as follows:
|
Class |
Value of voting plan claims present and voting for (%) |
Value of voting plan claims present and voting against (%) |
|
Bondholders
|
100% |
0% |
|
Unsecured Plan Creditors
|
0% |
100% |
77. As explained in the Chairperson’s report, a vote was submitted by CEPLC in respect of the M&A Liabilities (and admitted for voting). A further vote was submitted on behalf of CEUK in the sum of US$41.8 million. This claim was rejected by the Chairperson on the basis that the claim is wholly without merit and, in any event, does not fall within the scope of the Plan (see also footnote 1 above).
(H) Statutory Conditions for sanctioning the Plan
78. By its Claim Form dated 27 February 2025, the Plan Company invokes Part 26A of the CA 2006 as the basis for the relief it seeks. Section 901A of CA 2006 stipulates conditions to be met for Part 26A to apply. I addressed these conditions in paragraphs [76] to [82] of the Convening Judgment. I expressed the view that both seemed to be satisfied, sufficiently at least to justify the convening of class meetings (see paragraph [82] of the Convening Judgment). I confirm that I continue to be satisfied in that regard for the reasons I gave then. I need say no more about this.
79. The purpose of invoking Part 26A of CA 2006 (rather than Part 26, which is confined to cram downs within a class) is that, provided that the pre-conditions for its application are met, Part 26A gives the Court jurisdiction to sanction a compromise or arrangement where one or more classes dissent.
80. To invoke what has become known as the Court ’s “cross-class cram down” jurisdiction there must be at least one assenting class. Thus, by section 901F(1) of the CA 2006, the Court has a discretion to sanction a restructuring plan if, “on an application under this section”:
“… a number representing 75% in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting summoned under section 901C, agree a compromise or arrangement…”.
81. For this purpose, the same principles apply as in the context of a Part 26 Scheme (except as to the majority required). The test for sanction applicable in the scheme context was set out in Re Telewest Communications Plc (No 2) [2005] 1 BCLC 772 at [20]-[22] per David Richards J (as he then was):
“The classic formulation of the principles which guide the Court in considering whether to sanction a scheme was set out by Plowman J in In re National Bank Ltd [1966] 1 WLR 819, 829 by reference to a passage in Buckley on the Companies Acts, 13th ed (1957), p 409, which has been approved and applied by the courts on many subsequent occasions: ‘In exercising its power of sanction the Court will see, first, that the provisions of the statute have been complied with; secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. The Court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting; but at the same time the Court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the
matter
with a view to the interests of the class which it is empowered to bind, or some blot is found in the scheme.’
This formulation in particular recognises and balances two important factors. First, in deciding to sanction a scheme under section 425, which has the effect of binding members or creditors who have voted against the scheme or abstained as well as those who voted in its favour, the Court must be satisfied that it is a fair scheme. It must be a scheme that ‘an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve’. That test also makes clear that the scheme proposed need not be the only fair scheme or even, in the court’s view, the best scheme. Necessarily there may be reasonable differences of view on these issues.
The second factor recognised by the above-cited passage is that in commercial
matters
members or creditors are much better judges of their own interests than the courts. Subject to the qualifications set out in the second paragraph, the Court ‘will be slow to differ from the meeting’.”
82. In Re AGPS Bondco Plc [2024] Bus LR 745 at [119]ff Snowden LJ considered the application of these principles in the context of Part 26A, noting that:
“In general terms, the principles set out in the first and fourth stages of my summary in Noble Group will continue to apply. The court must confirm that the classes have been correctly constituted, that the explanatory statement is adequate, and that there is no defect in the plan making it unlawful or otherwise inoperable.”
83. Snowden LJ then went on at [122]-[128] to explain that it is “almost invariably” appropriate for a plan to be sanctioned vis-à-vis the assenting classes:
“[122] As David Richards J explained in Telewest [2005] 1 BCLC 772, para 21, under Part 26 the question of whether it is ”fair“ to impose a scheme upon the dissenting minority within a class is answered by applying a limited rationality test to the majority vote within that class. The court does not impose its own view of the commercial merits of the scheme, but asks a more limited question in relation to each class of whether the compromise or arrangement embodied in the scheme is one that ”an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve.
[123] Almost invariably, under Part 26 this question is answered by the very fact of the vote in favour at each class meeting. The confidence that the court reposes in the decision of each class meeting in such circumstances is reinforced by the fact that the decision in favour of the scheme is the decision of an enhanced majority of 75% in value, rather than just a simple majority, of those who voted at the class meeting. Moreover, the greater the majority in favour at the class meeting, the greater confidence that the court can have that the scheme is in the interests of the class in question.”
“[128] I see no reason why these principles that have been developed in relation to schemes should not be applied under Part 26A within an assenting class as the basis of an exercise of discretion to impose the plan on the dissenting minority within that class.” [Emphasis is as in Snowden LJ’s judgment.]
84. This section is clearly satisfied in this case, in view of the fact that all the bondholders present and voting approved the Plan. No “intra-class cram down” is required.
85. Where, however, there is a dissenting class which a plan company wishes to “cram down”, the plan company must persuade the Court that it can satisfy conditions A and B under section 901G of CA 2006. If those conditions are met, the Court has jurisdiction (assuming an otherwise valid Part 26A claim) to sanction a plan under section 901F notwithstanding that the arrangement has not been approved by the requisite majority in every meeting of creditors, provided that conditions A and B are met (a cross-class cram down).
86. Section 901G of CA 2006 materially provides as follows:
(1) This section applies if the compromise or arrangement is not agreed by a number representing at least 75% in value of a class of creditors or (as the case may be) of members of the company (“the dissenting class”), present and voting either in person or by proxy at the meeting summoned under section 901C.
(2) If conditions A and B are met, the fact that the dissenting class has not agreed the compromise or arrangement does not prevent the court from sanctioning it under section 901F.
(3) Condition A is that the court is satisfied that, if the compromise or arrangement were to be sanctioned under section 901F, none of the members of the dissenting class would be any worse off than they would be in the event of the relevant alternative (see subsection (4)).
(4) For the purposes of this section “the relevant alternative” is whatever the court considers would be most likely to occur in relation to the company if the compromise or arrangement were not sanctioned under section 901F.
(5) Condition B is that the compromise or arrangement has been agreed by a number representing 75% in value of a class of creditors or (as the case may be) of members, present and voting either in person or by proxy at the meeting summons under section 901C, who would receive a payment, or have a genuine economic interest in the company, in the event of the relevant alternative.”
87. There is no dispute that Condition B (the presence of an assenting class with a genuine economic interest) is satisfied in this case.
88. The dispute is about Condition A. The Plan Company and the Steerco insist that the only Relevant Alternative to the Plan is a distributing administration or liquidation. By letter dated 19 May 2025, HMRC stated that it would invite the Court to conclude that the most likely relevant alternative is “i. The Plan as amended by either of the terms set out in the Joint Letter [i.e., Option A or Option B]; or ii. A scenario where the Plan Company agrees Time to Pay with HMRC and reaches a deal with Capricorn”. Capricorn adopts that but puts the Relevant Alternative more simply as being “a different restructuring” and submits that it is well established that a different restructuring can be the “Relevant Alternative”.
(I) The dispute as to the “Relevant Alternative” to the Plan and its relevance
89. The phrase “the “Relevant Alternative” is specifically defined in section 901G of the CA 2006 Act as:
“whatever the court considers would be most likely to occur in relation to the company if the compromise or arrangement were not sanctioned”.
90. The concept of the Relevant Alternative is a fundamental pillar in the architecture of Part 26A. Its identification can be a crucial part of determining (a) what class meetings to consider the Plan should be called; (b) whether the Court has jurisdiction to “cram down” a dissentient class, since if any members of a class which dissents to the Plan would be any worse off under the Plan than they would be in the Relevant Alternative, the “cram down” jurisdiction is not engaged (see Condition A in section 901G); (c) whether the Plan has been agreed by a number representing 75% in value of a class of creditors who would receive a payment, or have a genuine economic interest in the Plan Company in the event of the Relevant Alternative (see Condition B of section 901G) and (d) the overall fairness of the Plan.
91. In Re CB&I UK Ltd [2024] BCC 551 Michael Green J summarised the legal principles applicable to the determination of the Relevant Alternative as follows:
“The determination of the Relevant Alternative is made at the time at which sanction is being considered. If there are a number of alternatives, the Court must select the alternative which is more likely to occur than the other alternatives: see Virgin Active at [106]-[108]. At [107], Snowden J said:
“… the Court is not required to satisfy itself that a particular alternative would definitely occur. Nor is the Court required to conclude that it is more likely than not that a particular alternative outcome would occur. The critical words in the section are what is ”most likely“ to occur. Thus, if there were three possible alternatives, the Court is required only to select the one that is more likely to occur than the other two.”
This was adopted by Zacaroli J in Re Hurricane Energy Plc [2021] EWHC 1759 (Ch), where he said at [37] that:
“the Court is not required to be satisfied that a particular alternative would definitely occur, merely (where there are possible alternatives) which one is most likely to occur.”
It has been recognised in the cases that because of the nature of the Relevant Alternative, it is a
matter
on which the directors are uniquely well-placed to give evidence. As Trower J said in Re E D & F Man Holdings Ltd [2022] EWHC 687 (Ch) at [39]:
“In my view, the Court should recognise that the directors are normally in the best position to identify what will happen if a scheme or restructuring plan fails. Where the evidence appears on its face to reflect a rational and considered view of the company’s board, the Court will require sufficient reason for doubting that evidence.”
The same was said in Re AGPS Bondco Plc [2023] EWHC 916 (Ch) per Leech J; and by me in Re Fitness First Clubs Ltd [2023] EWHC 1699 (Ch) at [63].
However, the Court should not just accept what the Plan Company’s witnesses say about this and should carefully scrutinise the evidence put forward by the Plan Company and its supporting creditors. It is often in the interests of a plan company (and senior supporting creditors) to present a “doomsday” scenario as if it were the relevant alternative (or comparator) to a scheme or plan, in order to justify the treatment of a dissenting creditor. A disastrous liquidation may in some cases be the most likely alternative to a plan (or scheme). However, it needs to be borne in mind that the plan company and its stakeholders would naturally wish to avoid that outcome if at all possible and would act in a commercially rational way in their best interests should the plan company find itself in that position. Its evidence must therefore show that there is real substance to its assertion that such a liquidation is the most likely to occur.”
The Plan Company’s position in this case
92. Turning more specifically to the present case, the Plan Company’s position is that the Relevant Alternative to the Plan is a value-destructive distributing administration or a liquidation.
93. The Plan Company has provided both factual and expert evidence in support of its position. In particular, it has engaged:
(1) Ms Lisa Rickelton of FTI Consulting LLP (“FTI”), who is a licenced UK insolvency practitioner, an ICAEW Chartered Accountant and a partner and Senior Managing Director of FTI, to provide (with the permission of the Court ) an expert report, which the Plan Company called “the Relevant Alternative Report” and which:
“…outlines the most likely circumstances to arise should the Restructuring Plan fail to be implemented (“the Relevant Alternative”) and the outcome to Plan Creditors should the Restructuring Plan be sanctioned”.
Ms Rickelton updated her report in a Supplemental Relevant Alternative Report in which she considers the potential impact of the market volatility affecting the oil and gas sector on estimated recoveries for Plan Creditors under the Plan. Ms Rickelton concludes that if the Plan Company were to have a negative valuation, it is possible that the outcome to the Bondholders under the Plan may be lower than that available via the Relevant Alternative. However, Ms Rickelton confirms that returns for the Unsecured Plan Creditors would not be impacted and that they would be better off in the Plan than in the Relevant Alternative in all scenarios.
(2) Dr Stuart Amor, also a Senior Managing Director of FTI, who has over 20 years’ experience advising various investment banks on the valuation of oil and gas assets and has also produced an expert report on the valuation of the Plan Company on a cash-free and debt-free basis. Dr Amor’s report assesses the market value of the Plan Company as at 31 December 2024 (which does not include any additional synergy value which a particular purchaser might identify and be prepared to pay for). Dr Amor has not revalued to take into account declining oil prices, but Mr Tanner has confirmed that the Plan Company continues to consider his report to be an appropriate assessment of the value of the Plan Company.
(3) Mr Niels Kirk, who is the co-founder of Kirk Lovegrove & Company Limited (“KLC”), a mergers and acquisitions advisory firm based in London which focuses on transactions within the upstream oil and gas sector. He addresses the likelihood of achieving a sale of the Plan Company, assuming implementation of the Plan and the Restructuring. He has provided two reports, the latter updating his first report in light of declining oil prices since the Convening Hearing.
94. In summary, Ms Rickelton has concluded that:
(1) Successful implementation of the Plan and wider restructuring would (a) alleviate the existing and near-term liquidity pressure on the Plan Company that otherwise results from its existing obligations and upcoming maturities in relation to the Unsecured Liabilities and the Bonds; and (b) enable the Plan Company to continue trading without the pressure of impending payment deadlines associated with the Unsecured Liabilities and the maturities of the Bonds, and create a stable platform for it to pursue a renewed sale process (which had failed prior to the formulation of the Plan).
(2) In the event that the Plan is not sanctioned (and the wider Restructuring cannot be achieved) the consequences would be (a) the Plan Company would be expected to be cashflow insolvent; (b) short-term standstills would not be likely to be forthcoming from the Bondholder and dissenting Unsecured Plan Creditors; (c) the provision of bridge funding from the Bondholders or a third party is unlikely to be economically rational for them, given the lack of any return from such funding in light of the challenging prospects of a future sale without the benefits of the Plan, and quantum and all maturities of the claims, which will remain due and owing; and (d) no going concern sale of the business would be likely to be viable.
(3) In consequence, the Plan Company would “most likely enter a formal insolvency proceeding (whether an English law administration, creditors’ voluntary liquidation or compulsory liquidation)”.
|
Plan Outcome vs RA Outcome - Plan Creditors | ||||||||||
|
|
Claim
|
Relevant Alternative Outcome |
Plan Outcome (Low) |
Plan Outcome (High) | ||||||
|
(USD m) |
(USD m) |
(%) |
(USD m) |
(%) |
Multiple of RA |
(USD m) |
(%) |
Multiple of RA |
| |
|
Super Senior Bonds |
(54.29) |
17.99 |
33.15 |
23.16 |
42.65 |
1.3x |
39.61 |
72.97 |
2.2x |
|
|
Original Bonds |
(55.62) |
18.44 |
33.15 |
23.72 |
42.65 |
1.3x |
40.58 |
72.97 |
2.2x |
|
|
HMRC (EPL) |
(76.45) |
0.11 |
0.15 |
3.82 |
5.00 |
33.2x |
3.82 |
5.00 |
33.2x |
|
|
M&A Creditor |
(29.50) |
0.04 |
0.15 |
1.48 |
5.00 |
33.2x |
1.48 |
5.00 |
33.2x |
|
|
WPUK is estimated to be due VAT Receivable of 1.875m as at the Relevant Alternative Date. In this scenario HMRC would be expected to set off this amount against EPL Claim. | ||||||||||
95. Ms Rickelton provided a table in her original report comparing her estimated outcomes for creditors (a) if the Plan is sanctioned and the Restructuring is implemented and (b) in the event of insolvency, with “high and low” estimates according to Bondholder returns which will depend on any synergy value which a purchaser might be willing to pay for, as set out below:
96. In his first witness statement, Mr Tanner states that (a) the wider Restructuring is “unlikely to be consummated” if the Restructuring Plan is not approved and sanctioned and (b) if the Plan and the wider Restructuring are not implemented, the Plan Company:
“does not anticipate having sufficient liquidity to meet its existing and upcoming payment obligations and as the Sales Process has not yet yielded any viable sales possibilities based on the Group’s current financial position, the Plan Company will likely suffer a significant liquidity shortfall in the near term…”
97. Mr Tanner states that he believes that “a combination of standstills and/or third-party funding seems unlikely” and bridge financing does not offer a realistic solution “in light of the challenging prospects of a successful sales process absent implementation of the Restructuring”.
98. In those circumstances, Mr Tanner states that he believes that:
“…it is likely that the Plan Company’s directors would be forced to conclude that the Plan Company no longer has a reasonable prospect of avoiding entering into a formal insolvency process…”.
99. In that event, upon entering the relevant insolvency process, the Plan Company:
“…would be in default under its contractual DSA arrangements with its Joint Venture Partners including because it is likely that no further payments would be made by an insolvency practitioner on behalf of WPUK to the Joint Venture Partners under the JOAs…”;
and he would expect that then;
“the Joint Venture Partners would seek to take forfeiture action in respect of the relevant fields, removing WPUK as a licensee and taking ownership of WPUK’s right to its percentage interest share of petroleum under the relevant Licences. This would mean that WPUK’s income stream would be lost, which would have devastating consequences on the
Waldorf
Group as a whole.”
The position of the Unsecured Plan Creditors
100. Neither Capricorn nor HMRC put in any evidence to challenge the expert evidence filed in support of the Restructuring Plan by the Plan Company. As elaborated later in this judgment, their position is simpler and more basic.
101. Their position is that none of that evidence addresses the real question, which they submit is whether the more realistic comparator, and thus the more likely Relevant Alternative to the Plan, is another plan amended to provide for a negotiated, fairer outcome for Capricorn and HMRC.
102. Both Capricorn and HMRC submitted that the Plan Company had never properly explored the obvious possibility of a successful negotiation with them resulting in a consensual deal. This would not involve the Plan Company in a complex negotiation process across multiple stakeholders. It has always been clear that the Plan Company would need to negotiate with only three constituencies - the Bondholders, HMRC and CEPLC. The Plan Company has previously agreed a deal with the Bondholders. HMRC and CEPLC have shown themselves to be realistic, pragmatic counterparties (albeit they have negotiated in a vacuum to date).
103. Capricorn submitted that “a different restructuring is obviously the relevant alternative in this case.” They emphasise especially that:
(1) HMRC and CEPLC have shown that they are willing to discuss and negotiate a settlement by which the debts owed to them are extinguished for only a small percent of their value. There can be no serious suggestion that they will take steps to enforce their debts or precipitate a collapse into an insolvency process. Their whole case is that they want to negotiate a consensual restructuring.
(2) The Bondholders are forecast to receive between US$46.9 million to $80.2 million (with further potential upside in respect of the “synergies” discussed above) if a solvent sale of the Plan Company takes place. That is an uplift of between US$10.5 million and US$43.8 million as compared to an administration or liquidation. The idea that these sophisticated commercial entities will throw a very significant upside away in a fit of pique, refuse to talk to HMRC and CEPLC and petition for the Plan Company’s winding up is fanciful.
(3) While negotiations are ongoing, and given how close the parties already are, the directors of the Plan Company are perfectly entitled to consider there is a reasonable prospect of a solvent solution. Given that the directors did not consider it necessary to cause the Plan Company to enter an insolvency process in, say, January 2025 there is no reason to think they would consider it necessary now.
104. Likewise, HMRC insisted that “the relevant alternative is not a terminal insolvency process; rather it involves accepting either one of the two joint offers made by the unsecured creditors…in which case, HMRC would be in a better position than under the Plan.”
My assessment of the dispute and conclusion as to the Relevant Alternative
105. The dispute hinges partly on an issue of fact, which is whether there would be any realistic prospect of a successful negotiation, and partly on a legal question of whether what Capricorn and HMRC propose, is sufficiently choate, especially if it is still subject to negotiation.
106. As to the issue of fact, it is first necessary to identify what, as at the date of the Sanction Hearing, Capricorn and HMRC (whom I shall refer to as “the Unsecured Plan Creditors”) have put forward as being the Relevant Alternative.
107. It seems to me that, in circumstances where there has been no meaningful or relevant engagement, the Unsecured Plan Creditors have sought to sail between Scylla and Charybdis: or, less figuratively, between certainty (which runs the danger of appearing to signify intransigence) and flexibility (which runs the danger of lacking sufficient definition).
108. On 16 May 2025, the Unsecured Plan Creditors wrote jointly to the Plan Company setting out two alternative offers by which they said the Plan could be amended to take a form that the Unsecured Plan Creditors would be willing to support. These offers are referred to respectively in that letter as “Option A” and “Option B” (together, the “Offers” and implementation of a deal contemplated by the Offers, the “Alternative Deal”).
109. By letter dated 19 May 2025, HMRC stated that it intended to invite the Court to conclude that the most likely Relevant Alternative is “i. The Plan as amended by either of the terms set out in the Joint Letter [i.e., Option A or Option B]”. However, HMRC also put forward another option: “ii. A scenario where the Plan Company agrees Time to Pay with HMRC and reaches a deal with Capricorn”.
110. Under Option A, the Unsecured Plan Creditors would receive an immediate cash payment of 20% of the value of their respective claims against the Plan Company (rather than the current 5% proposed under the Plan). This would amount to approximately US$21,190,000 (versus the US$5,297,500 proposed in the Restructuring Plan). All other terms of the Restructuring Plan would remain as they are.
111. Under Option B, in addition to 5% cash payment under the Restructuring Plan, the Unsecured Plan Creditors would receive an “Upside Sharing Instrument”, which would involve the Unsecured Plan Creditors sharing (in an equal split between themselves) 25% of any recoveries (through either principal or interest payments) made by the Bondholders following the sanction of the (amended) Restructuring Plan, provided that the Unsecured Plan Creditors would receive nothing under the Upside Sharing Instrument until such time as the Bondholders have recovered US$38 million (being a level slightly above the estimated Bondholder recoveries in the Relevant Alternative (i.e., a formal insolvency process), which are estimated by Ms Rickelton to be US$36,430,000).
112. In addition, both Offers included:
(1) payment of the Unsecured Plan Creditors’ costs incurred in connection with the Plan Company’s Restructuring since January 2025, and cost coverage for any and all costs that continue to be incurred until such time as the agreement is concluded and implemented between the Unsecured Plan Creditors and the Plan Company; and
(2) engagement of an independent committee of inquiry, funded by the Plan Company and led by a King’s Counsel with assistance from an “independent solicitor” (the “Independent Committee”). According to the Unsecured Plan Creditors, the Independent Committee would be tasked with investigating and then preparing an opinion jointly for the Plan Company and the Plan Creditors in relation to any viable claims against third parties or directors arising out of: (a) the July Refinancing; and/or (b) the payment of the October 2022 Dividend by the Plan Company, or otherwise satisfy the Plan Creditors that there are no viable claims in this regard. Under the Offers, it was stated that the Independent Committee should be engaged “as soon as practicable” but by no later than 30 May 2025.
113. After the Plan Company and the SteerCo rejected both these Options and refused to negotiate either of them, the Unsecured Plan Creditors subsequently (by letter to White & Case dated 18 June 2025), amended these Options, abandoning the requirement that an Independent Committee should be established, and “to obviate the need for a contested Sanction Hearing” proposed:
(1) a cash payment of 15% (rather than 5%) of the value of their claims against the Plan Company (amounting to approximately US$15.75 million), with all of the other terms of the Plan and broader restructuring remaining as they are; and
(2) payment of their costs incurred in connection with the Plan Company’s Restructuring since January 2025, and cost coverage for any and all costs that continue to be incurred until such time as the agreement is concluded and implemented between the Unsecured Plan Creditors and the Plan Company.
114. By letters dated 28 May 2025 and 20 June 2025, addressed to Mayer Brown and HMRC and copied to the SteerCo’s solicitors (Milbank LLP (“Milbank”)), White & Case (for the Plan Company), rejected the original Joint Offer of 28 May 2025 and the revised proposals of 18 June 2025, respectively. They reiterated their position, and that of the SteerCo, in the letter of 20 June 2025 in the following terms:
“The Plan Company does not have the available liquidity to make an increased upfront payment to the Unsecured Plan Creditors above that which is being offered under the Plan and the SteerCo have consistently made it clear that they will not fund any additional payments to the Unsecured Plan Creditors (nor are they receiving any upfront recoveries that could be reallocated to the Unsecured Plan Creditors). In that regard, the Plan Company remains unable to propose a counter-offer to the Original Offer and or the Revised Offer.”
115. Milbank (on behalf of the SteerCo) confirmed by email to the Court copied to the parties dated 20 June 2025 that neither form of Offer was acceptable. This reiterated the SteerCo’s unequivocal position as set out in the witness statement of Mr Andrew Dayton Simms (“Mr Simms”) on behalf of Frost Investment Advisors, LLC (“Frost”) and the other members of the SteerCo that:
“[given] the extent to which value is being provided to the Opposing Creditors beyond that available to them in a formal insolvency process (both through the immediate cash consideration and the contingent value rights) under the Restructuring Plan, the Restructuring Plan is the best possible deal for the Opposing Creditors that Frost (and I understand the other members of the SteerCo) will agree to in the circumstances. Put another way, Frost, and the other members of the SteerCo, would not have agreed to, and still will not agree to, a restructuring plan which sees the Bonds relinquish any more value to the Opposing Creditors…”
116. When cross-examined, Mr Simms emphasised that this attitude was also based on a point of principle which members of the SteerCo would be prepared to suffer losses to protect. His evidence in this respect was as follows:
“… It would be public record but the general view is that once we have a reputation for allowing junior creditors to jump senior creditors in line to improve their recoveries at our expense and our investors’ expense, it sets a very, very dangerous precedent for us. It would make it really hard to underwrite the credit because we never know how much of the asset value is going to float us. It is already unknown, but at this point it is OK, well, do we need to give 40% to junior creditors to get a plan sanctioned? Do we need 30% whatever it is? It just encourages, you know, again, ransom behaviour…, where we are kind of being held hostage as senior creditors to improve the economics of junior creditors without any consideration being given.”
117. Although neither White & Case’s letter of 20 June 2025 nor Milbank’s email expressly addressed the still extant Offer B, which (as Mr Colclough emphasised on behalf of Capricorn) required no additional payment now over the 5% already offered either by the Plan Company or by the SteerCo and the Bondholders, it is clear from Mr Simms’ first witness statement, as summarised in Mr Bayfield’s skeleton argument, that the SteerCo consider it unacceptable. As Mr Bayfield put it:
“Option B would involve [Capricorn] and HMRC being elevated in the distribution waterfall to share the returns of the secured creditors (i.e. the Bondholders) whilst a significant portion of the secured creditors’ claims remains unpaid and [Capricorn] and HMRC retain their initial 5% upfront payment. In circumstances where, in a formal insolvency process, secured creditors would be entitled to payment of the entirety of their claims in advance of the Opposing Creditors (save in relation to the “Prescribed Part”), SteerCo consider that Option B would be wholly unfair [And they are not prepared to agree to it.]”
118. In those circumstances, at the Sanction Hearing, the Unsecured Plan Creditors tended to place more emphasis on their more open-textured, less definitive proposal of a “scenario where the Plan Company agrees Time to Pay with HMRC and reaches a deal with Capricorn.”
119. The Unsecured Plan Creditors emphasised in this regard that:
(1) There is considerable time for negotiations between the parties. The Plan Company contends that the Relevant Alternative is administration or liquidation but, if the Plan is not sanctioned, that is not an imminent risk. The Unsecured Plan Creditors’ whole case is that they want to negotiate consensual restructuring. There can be no serious suggestion that they will take steps to enforce their debts or precipitate a collapse into an insolvency process.
(2) The Bondholders are forecast to receive in between US$46.9 million to $80.2 million (with a further potential upside in respect of an additional premium for synergy value) if a solvent sale of the Plan Company takes place. That is an uplift of between $10.5 million and $43.8 million as compared to an administration or liquidation. The Court should not assume or accept the idea that sophisticated commercial entities will throw such a significant upside away.
(3) In the particular circumstances, the negotiating process would not be complex or involve multiple stakeholders. The Plan Company would need to negotiate with only three constituencies: the Bondholders, HMRC and Capricorn, in circumstances where the Unsecured Plan Creditors have shown themselves to be realistic and pragmatic counterparties.
(4) This is a slightly unusual case in that the benefits generated by the restructuring are easy to articulate. Prior to the Plan, the Plan Company has a negative valuation of some US$83.3 million. Immediately upon sanction, the Plan Company would have a positive valuation of some US$18.3 million. The difference between those two figures is US$101.8 million, which is the value of the liabilities owed to HMRC and Capricorn being extinguished under the Plan. In other words, all the benefits of the Restructuring are generated by the extinguishment of the debts owed to HMRC and Capricorn. The Bondholders are not contributing anything, save for the extension of the maturity date.
(5) The offer to the Unsecured Plan Creditors of 5% is not the
product
of negotiation, nor is it the
product
of any analysis of science or otherwise explained: it is, it appears, essentially arbitrary.
(6) Furthermore, this case is very different from the ordinary case in which senior creditors seek to rely on their position in the waterfall to impose a deal on a junior class. That is because (quoting almost verbatim from Capricorn’s skeleton argument):
(a) In the ordinary case, the secured creditors can realise very significant value by enforcing their security over the assets of the debtor company and causing a sale of those assets. The Relevant Alternative is therefore sale of the assets through a security enforcement - and the restructuring plan is a means by which it is hoped additional value will be preserved over and above such a forced sale.
(b) However, that is not the case here. It is not suggested that the Bondholders have the ability to realise any significant value by selling the assets of the Plan Company (i.e., its oilfield licences) through a security enforcement. That is presumably because the complex regulatory environment that exists in respect of North Sea operations would prevent this.
(c) As a valuable asset sale through a security enforcement is not possible, it is necessary to sell the Plan Company itself (which also comes with the benefit of accumulated tax losses being available to a potential purchaser). But the Plan Company is only capable of being sold if the liabilities owed to HMRC and Capricorn are extinguished. Far from making a minimal contribution to the benefits of the restructuring, therefore, HMRC and Capricorn are making the vital contribution.
120. These are, to my mind, points of real substance, powerfully made. The question of fact to be determined is, in summary, whether these considerations are such as to undermine the evidence on behalf of the SteerCo and the Bondholders that, whether by reference to their own different assessment of the commercial pros and cons, or by reference to the point of principle asserted on their behalf by Mr Simms (see above), that the Bondholders and the Plan Company would rather face a loss consequent on administration or liquidation than bargain with the Unsecured Plan Creditors as
matter
of urgency to save the Plan.
121. There may be a difference in this regard according to whether the definitive Offers (as amended) or the more open-textured offer proposed is the Relevant Alternative.
122. As regard the definitive Offers, I do not consider that it would be realistic for the Court, in the teeth of their specific and unequivocal rejection, nevertheless to determine that they would be accepted for fear of the consequences otherwise. I do not think I can properly gainsay the evidence of both the Plan Company and the SteerCo that they will not agree to either of the alternative proposals put forward by the Unsecured Plan Creditors. Put another way, it is for a plan company to put forward a plan, and the Plan Company here would not wish to do so; further, given the SteerCo’s clear objection, what would be posited is that the Court should sanction a plan disapproved by the secured creditors, which would necessitate (unless I reject the SteerCo’s evidence) in the Unsecured Plan Creditors “cramming up” the secured creditors, which may theoretically be possible but is not realistic.
123. However, and again notwithstanding its rejection by the SteerCo, I consider that there could be a realistic prospect of negotiations to achieve a consensus on a figure somewhere between what is presently on offer and the amended Option A, once all concerned are brought face to face with the alternative. Put another way, I consider the prospect of the Bondholders taking the loss and forsaking the upside as perfectly possible but not likely.
124. The problem then is whether that prospect is one which, though it may be realistic, would nevertheless lack characteristics of a relevant alternative required by the law. That places the focus on the authorities which have identified, or at least begun to identify, what the law requires.
125. In addition to Michael Green J’s statement in Re CB&I UK Ltd of the principles to be applied in determining the relevant alternative as set out in paragraph [91] above, Mr Bayfield referred me to a number of cases in which dissenting creditors have attempted to argue that the relevant alternative to the plan was an alternative plan or a consensual deal: Re CB&I UK Ltd [2024] BCC 551; Re Project Lietzenburger Strasse Holdco Sarl [2024] EWHC 468 (Ch); Re Sino Ocean Group Holding Ltd [2025] EWHC 205 (Ch); Re Thames Water Utilities Holdings Ltd [2025] EWHC 338 (Ch); Re Petrofac [2025] EWHC 1250 (Ch) (at first instance but since then appealed). Mr Bayfield pointed out that this form of argument failed in all of these cases. [9]
126. In Re CB&I UK Ltd, Michael Green J was satisfied that the relevant alternative would involve a disorderly liquidation in which the company’s assets would be sold on a break-up basis. He reached this conclusion because he was satisfied that there was no time to negotiate any alternative deal with the opposing creditor (Reficar), and because the alternative contemplated by Reficar was “opportunistic” and would not command sufficient support among the secured creditors: see [94] and [97]-[101].
127. A similar conclusion was reached in Re Project Lietzenburger [2024] EWHC 468 (Ch). In that case Richards J rejected an argument by the dissenting creditor (Safra) that a Luxembourg plan was the relevant alternative to the plan, for reasons including (above all) the fact that “the Safra Proposal would not be implemented because of a lack of support among Senior Creditors”: see [144]. At [157], Richards J said:
“… the Senior Creditors’ rejection of the Safra Proposal came after it was given serious thought. That itself points against Safra’s suggestion that holders of the Senior Debt were ”bluffing“ when they rejected the Safra Proposal and pointed out flaws with it.”
128. Likewise, and of particular relevance to the present case, in Re Sino-Ocean Group Holding Ltd [2025] EWHC 205 (Ch), Thompsell J rejected an argument put forward by a dissenting creditor (Long Corridor) that the relevant alternative was a different deal. Thompsell J explained why he accepted the plan company’s position and rejected Long Corridor’s contentions at [22]:
“In relation to the question of the relevant alternative, I must agree with the Plan Company for various reasons:
i) In my view the definition requires a particular alternative to be identified. Long Corridor has identified no such alternative - whilst it did at a late stage put forward a plan referred to as the “Alternative Plan“, it is not now suggesting that this is the relative alternative, and given commercial defects identified in the Alternative Plan, I think Long Corridor is being realistic in not continuing to suggest that the Alternative Plan should be regarded as the relevant alternative. Instead, Long Corridor is now promoting a vague idea that Plan Creditors and shareholders might agree another plan, but that is not sufficiently choate an idea to amount to a relative alternative. Unless a putative alternative plan is specified in detail it is impossible for the court to judge the effect on creditors of that plan. [My emphasis]
ii) The undisputed evidence of Mr Sum is that the Plan Company can stave off its creditors for only another month, whereas agreeing and implementing another plan would take many weeks longer. A relevant alternative must be something where there is at least some prospect of implementing the alternative, and on the evidence before the Court there is no prospect that the Plan Company could hang on to do anything other than to go into liquidation.
iii) There is evidence that the Class A creditors would not support an alternative plan of the type advocated by Long Corridor and also there may be little reason for shareholders to provide the necessary votes for it.
iv) Long Corridor’s suggestion that a better plan could emerge out of a liquidation is not realistic given the complex nature of the Plan Company’s Group; liquidation of the Plan Company is likely to lead to severe reputational and financial damage (for example through acceleration of loans and the drying up of credit lines through-out the Group) and there would be insufficient resources to pay a liquidator to put in place and meet the necessary professional fees in developing and implementing such a plan.”
129. In Re Thames Water a similar point arose once again. In that case, the plan company’s directors gave evidence that the plan company would go into special administration (“SAR”) if the Court refused to sanction the plan. This position was supported by an ad hoc group of senior creditors (the “Class A AHG”). However, a group of junior creditors (the “Class B AHG”) argued that the relevant alternative was a different deal on more favourable terms to the Class B AHG. Leech J rejected that argument (and there was no appeal on this point, and the Court of Appeal did not cast doubt on the findings of fact made by Leech J). Leech J explained at [168] that:
“the Class B AHG submitted that if I refused to sanction the Plan, the Class A Creditors would quickly change their minds and support the B Plan in order to avoid a SAR. They relied on the fact that all of the witnesses were concerned to avoid a SAR if at all possible, that the terms of the B Plan were better for the Plan Company and that the only reason why the Plan Company has been forced to promote the Plan rather than the B Plan is that its hands are tied by the TSA.”
However, as Leech J pointed out at [169]-[172], the assertions made by the Class B AHG were not supported by the evidence.
130. Most recently, in Re Petrofac at [55] at first instance, Marcus Smith J identified that going on to note that the evidence was of “Mr Read, a partner at Mason Capital, a member of the Ad Hoc Group…firmly rejected the suggestion that a tweaking of the Plan was possible. He considered that the only alternative to the Plan was not Plan B but Liquidation.” On that basis, he also rejected the opposing creditors’ argument that the relevant alternative was a different deal. The creditors did not pursue this argument on appeal, for the purposes of which it was accepted that the relevant alternative would be an insolvent liquidation of the companies in the Petrofac Group, including the Petrofac plan companies: see Saipem S.P.A and others v Petrofac Limited and Another [2025] EWCA Civ 821 (“Re Petrofac”) at [44].
131. By reference to these authorities, Mr Bayfield, in rejecting any alternative proposed by the Unsecured Plan Creditors, submitted in his skeleton argument that, in fact, it does not appear that there is any case under Part 26A (or Part 26) in which the Court has held that the relevant alternative (or comparator) is an alternative deal that is opposed by senior secured and/or fulcrum creditors. Mr Bayfield suggested that this is not surprising, given (as he submitted was well established) that an alternative deal could only be the relevant alternative if it is capable of being implemented at the date of the sanction hearing.
132. As indicated above in paragraph [128] above, I consider Thompsell J’s decision in Re Sino-Ocean Group Holding Ltd, and, in particular the passage which I have underlined in my quotation from it, to be particularly relevant to the present case. That is, of course, not strictly binding on me: but I would follow it unless convinced it is wrong; and, on the contrary, I think it is correct, although perhaps it needs a little elaboration to bring out the point that the relevant alternative is a reference point for
matters
central to the statutory architecture, including the identification of proper classes, the assessment of whether a creditor is “no worse off”, as well as the assessment whether a plan is sufficiently consistent with existing entitlements. What is put forward as a relevant alternative must be sufficiently clear, certain and defined for the purpose of satisfying its function in the statutory scheme. An inchoate alternative, even though it may be likely to be achieved, has not the characteristics required.
133. Accordingly, I have (with some reluctance) concluded that, notwithstanding the attractive way in which both Capricorn and HMRC put their positions, the Relevant Alternative in this case is a formal insolvency process, either a distributing administration or a liquidation process (which, in practical terms, would be largely indistinguishable as the same strategy would be pursued in both, resulting in the same outcome for Unsecured Plan Creditors and Bondholders (with the exception that in liquidation the recovery to the Bondholders may be slightly lower due to certain associated costs)).
134. It is not disputed that in such an administration or liquidation, the Unsecured Plan Creditors would be worse off than under the proposed Plan. Condition A is thus, in my judgment, satisfied.
(J) Fairness and the exercise of Discretion
135. However, the conclusion that the Court has jurisdiction to sanction a plan which requires a cross-class cram down does not signify that it should exercise that jurisdiction. If Conditions A and B are satisfied, the Court then needs to consider whether to exercise its discretion to sanction a plan.
136. In the context of a Part 26 Scheme, where the Court also has a discretion which, it is well established, must be exercised by reference to the particular facts of the case, the fact that the jurisdictional requirement of assent by the statutorily required majorities of each class is, as it were, a large part of the answer, unless there is evidence that the results are polluted by the majority voted having been improperly motivated or suborned. That is not so in the context of a Part 26A plan, where the exercise of discretion is more complex, partly because the consequences may be more severe and partly because (or as an aspect of that) the Court does not have the comfort of the views of a majority within a class. It is one thing that (as in a Part 26 scheme) the views of the regiment within a class should prevail unless polluted by improper purpose and/or majority pursuing objectives of which the minority may substantially be deprived, and quite another (as in a Part 26A plan) to overrule a majority class dissent.
137. This fundamental difference was explained and elaborated by the Court of Appeal in Re AGPS BondCo Plc [2024] EWCA Civ 24 at [153]-[154]
“[153] At [65], the Judge accepted that satisfaction of Condition A was a necessary jurisdictional requirement for cross-class cram down but gave rise to no presumption in favour of sanction. I consider that he was right to do so. As I explained in Virgin Active at [224], once the court is satisfied that Conditions A and B have been met, it must still go on to consider whether to exercise its discretion in light of all the relevant factors and circumstances. That is apparent from the permissive terms of section 901G(2) which refer back to the discretion given to the court under section 901F ("may sanction"), and the very clear statement in paragraph [15] of the Explanatory Notes that the court may refuse to sanction a plan even if Conditions A and B are satisfied.
[154] If and to the extent that Trower J might be taken to have suggested otherwise in DeepOcean at [48] when he remarked that satisfaction of Conditions A and B would mean that a plan had "a fair wind behind it" when it came to the exercise of discretion, that approach should not be followed. Indeed, as I have indicated above, Trower J subsequently accepted in ED&F Man at [48] that there was "no kind of presumption" that the court should exercise its discretion in favour of sanctioning a plan merely because Conditions A and B have been satisfied.”
138. The
matters
to be taken into account in the exercise of the Court ’s discretion in relation to an application for sanction of a Part 26A plan have recently been addressed by the Court of Appeal not only in Re AGPS BondCo Plc but more recently in Re Thames Water and more recently still, in Re Petrofac.
139. This trilogy of Court of Appeal decisions has demonstrated and explained, not only the process of “horizontal” comparison between classes (see especially Re AGPS BondCo Plc at [148] to [182]), but also an issue of developing importance generally, and acute importance in this case: the weight (if any) to be given to the views of “out of the money” creditors. These cases mark, with increasing emphasis, a departure from the case principally relied on by Mr Bayfield in this context and described by him (in his skeleton argument) as the “starting point for considering the treatment of out of the money creditors”, namely Re Virgin Active Holdings Limited [2021] EWHC 1246 (Ch).
140. I should, however, before addressing the application of the guidance in the three cases in turn, emphasise that the fact that I have described them as a trilogy should not be taken to signify that I have overlooked the differences between them.
141. In that connection, I agree with Mr Bayfield’s point, well made in his Note on the Court of Appeal’s Judgment in Re Petrofac (which he submitted, as in the case of the other participants), at my invitation when the decision in Petrofac was published (some days after the conclusion of the Sanction Hearing), that it is necessary in examining their application to identify the type of restructuring which is contemplated by the Plan.
142. Mr Bayfield has identified two basic types of restructuring:
(1) A plan which seeks to implement a comprehensive recapitalisation, utilising new money and/or a debt for equity swap, to enable the plan company (or a successor company) to trade profitably into the future for the benefit of its new stakeholders: Mr Bayfield characterised this as being the nature and objective of the plan in Re Petrofac.
(2) A plan which seeks to wind down a company’s business to derive a greater return for its existing creditors than would otherwise be available in a formal insolvency process: Mr Bayfield characterised this “wind down” type as the nature and objective of the plan in Re AGPS BondCo Plc.
143. Mr Bayfield sought to draw a difference between these two types of restructuring plan in terms of the importance to be attached to the comparison to be made, in assessing fairness, with what would be the rights of dissenting creditors in the relevant alternative ordinarily applicable in such a case, that is to say, an insolvency process. In contrast to a plan of the first type, he submitted that in a plan of the second type, the litmus test of fairness should continue to be predominantly, perhaps exclusively, based on the relevant alternative.
144. Mr Bayfield appeared to accept that the Plan in this case, which seeks to enable ongoing trading for the purposes of achieving a sale of the Plan Company itself with a view to minimising the losses to its existing creditor, does not fall squarely within either of his two types of restructuring plan. However, he nevertheless categorised it as a “wind down” plan falling within or constituting a sub-set of the second of the two types of restructuring plan he identified. As he elaborated in further submissions after the hearing with reference to the judgment of the Court of Appeal in Re Petrofac (which was handed down on 1 July 2025), he submits that the guidance applicable is that provided in Re AGPS Bondco (at [159-160]), in which Snowden LJ agreed with Zacaroli J’s statement in In re Houst Ltd [2023] 1 BCLC 729 (“Houst”), that in determining whether the plan is fair between different classes of creditor an (Mr Bayfield would argue, the most) obvious reference point in such a case is what would be the position of creditors in the relevant alternative.
145. On that basis, and by taking that as the appropriate reference point for a plan such as this Plan, Mr Bayfield seeks to present the 5% upfront payment to the Unsecured Plan Creditors as “a deviation from the existing waterfall in their favour (and would provide them with an upfront return more than 33 times greater than their return in the relevant alternative prior to any additional value under the upside sharing arrangements).”
146. I shall return later to Mr Bayfield’s categorisation of the Plan and the conclusion he urged should follow, noting for present purposes that I do not agree with it, primarily because the objective of the Plan is to realise some economic advantage from the continuation of the plan company as a going concern, whether to trade it or to sell it, rather than (as in a typical wind down plan) to save the costs and avoid other tax or fiscal disadvantages of the relevant insolvency process.
147. In any event, it seems to me that although (as noted in paragraph [141] above) it is necessary to have regard to the differences between types of plan presented for sanction, all three in the trilogy of Court of Appeal cases are relevant in determining what weight is to be given to a comparison with the Relevant Alternative in assessing the fairness of a plan at the stage of exercising the court’s discretion. In my judgment, in this case, a comparison with the Relevant Alternative should not be the predominant comparator in assessing fairness in the context of the Plan.
148. I turn to consider each of the three cases, before explaining in more detail the application to the Plan of my view that of the three, Re Petrofac seems to me to offer the most direct guidance in terms of the approach to be taken to the related central issues of (a) the nature of the court’s unusually draconian power of cross-class cram down, (b) the purposes for which that power is to exercised and the circumstances in which it is proper to be exercised, and (c) what is the appropriate test of fairness.
149. In Re AGPS BondCo Plc, the Court of Appeal emphasised (at [160]) that the exercise of the Court’s Part 26A cross-class cram down power “cannot…properly be carried out merely by asking whether any dissenting creditor will be any worse off as a result of the restructuring plan than in the relevant alternative. That would simply be to restate Condition A in section 901G.” Snowden LJ’s judgment explains (at [160]) that in determining the fairness of overriding a dissenting class’s right of veto:
“[160] …As a
matter
of principle, when the court exercises its discretion to impose a plan upon a dissenting class, it subjects that class to an enforced compromise or arrangement of their rights in order to achieve a result which the assenting classes of creditors consider to be to their commercial advantage. In my judgment, that exercise of a judicial discretion to alter the rights of a dissenting class for the perceived benefit of the assenting classes necessarily requires the court to inquire how the value sought to be preserved or generated by the restructuring plan, over and above the relevant alternative, is to be allocated between those different creditor groups.”
150. This represented a qualified but clear departure from the approach in Re Virgin Active of ignoring out of the money creditors almost entirely. The Court of Appeal maintained some vestige of the approach there, in accepting that in a ‘wind-down’ case, where the claims of all creditors would rank equally for a pari passu distribution of the debtor’s assets, “a court would normally approve a plan which replicated that pari passu distribution in relation to the benefits of the restructuring over and above the distributions that could be expected in the relevant alternative.”
151. Re Thames Water concerned what has become known as a “bridging” or “interim” plan, the objective of which is to buy the plan company the time it needs in order to effect a longer-term restructuring in a subsequent more comprehensive restructuring plan. This second case in the trilogy, which again emphasises the necessity of undertaking a “horizontal comparison” in every case where cross-class cram down is proposed, marks a more definite departure from Virgin Active.
152. Of particular importance in this context is the passage of the judgment of the Court (Sir Julian Flaux C., Zacaroli LJ and Sir Nicholas Patten) at [149], stating as follows:
“[149] As a
matter
of principle, we reject the rigid approach suggested by the Plan Company. While it may well be right in some cases to conclude that the fact that a dissenting class would be out of the money in the relevant alternative is a sufficient justification to exclude them from whatever benefit the restructuring preserves or generates, that will not necessarily always be so. As we have already noted, and in agreement with the submissions of Mr Thornton on this point, there are myriad reasons why a company might be suffering financial difficulties, and why a plan may be proposed, and a variety of structures that it might adopt. The nature of the benefits preserved or generated by a plan and the extent to which a fair distribution of those benefits will require consideration to be given to those who would be out of the money in the relevant alternative are likely to vary accordingly.”
153. Further, having noted its preference (at [117]) of the phrase “the benefits preserved or generated by the restructuring” to what had, in earlier cases (including Re AGPS), been called “the restructuring surplus”, and then (at [118-119]) clarified that this is because such benefits may be or include more intangible advantages, including (as in that case) the opportunity of preserving or obtaining further value.
154. I agree with Mr Colclough’s submission in his skeleton argument on behalf of Capricorn that it is important to note how the Court of Appeal elaborated and explained the application of this restatement of relevant “benefits” on the facts of Thames Water. The restructuring plan in that case involved the extension of the maturity date of certain debt including what was called the Class A debt and the Class B debt. The Class A Creditors supported the plan but the Class B Creditors, who were “out of the money” in the relevant alternative, opposed it. In considering the relative contributions being made by the Class A and Class B Creditors the Court of Appeal said the following at [152] (emphasis added):
“[152] The agreement by the Class B Creditors to the postponement of the maturity date in respect of their loans is as critical in achieving the benefit of the restructuring, over the relevant alternative, as the postponement of the maturity date in respect of the Class A Creditors' loans. Both sets of creditors contribute equally in this sense to the benefits to be preserved or generated by the Plan.”
155. Thus, notwithstanding the fact that the Class B Creditors were “out of the money” in the relevant alternative, the question of fairness was to be approached on the basis that they had contributed equally to the benefits preserved or generated by the restructuring.
156. Also important, and especially significant in the present case, in its judgment in Thames Water (at [169]) the Court of Appeal added the following:
“[169] …if the Plan Company wishes to obtain the Court's sanction to RP2, it will need to demonstrate that it has engaged with any reasonable proposals made to it, and that it has indeed communicated fairly with all of the Plan Creditors throughout the restructuring process. The implementation of RP2 will be conducted in the full glare of publicity, and the Plan Company has fair warning that it must engage fairly with, and provide sufficient information to, all stakeholders throughout the process. We reiterate the point made in §3 above, moreover, that it must do so at an early enough stage that any issues that arise can be identified, and narrowed, so that the judge before whom RP2 comes is not placed under the same intolerable pressure as Leech J was in this case.”
157. This emphasis on proper engagement with all stakeholders reflects increasing focus on the issue of consultation/negotiation in restructuring plans among judges, practitioners and academics. In September 2024, Professor Sarah Paterson (London School of Economics) published an important paper called The Conceptual Foundation of Cross-Class Cram down. Mr Colclough helpfully summarised Professor Paterson’s argument as follows:
(1) A scheme of arrangement involves cram down within a class. As the class has voted (75%+) in favour, the Court will (subject to confirming the class was fairly represented and there was no coercion of the minority) start from the position that creditors are better judges of what is in their interests than the Court: pages 3-6. In fact:
“the overall objective is to sanction a compromise or arrangement that the majority considers reasonable but that the minority is unreasonably holding out against… the concept of compromise or arrangement - what we might loosely call a ‘deal’ - is at the beating heart of the jurisdiction”.
(2) A restructuring plan involves cram down between classes. However, Professor Paterson suggests that it seeks to fulfil a similar function as with a scheme. On her analysis:
“cross-class cram down in the UK exists not only to motivate cooperative bargaining but also to enforce a commercially reasonable bargain that the parties could have agreed if cooperative bargaining had been possible”.
(3) In other words, according to this analysis, the Part 26A jurisdiction exists for cases where “cooperative bargaining” between creditor groups has not been successful. Professor Paterson suggests that this:
“is the normative justification for the cross-class cram down power in Part 26A: to solve the cooperative bargaining problem. Part 26A should do this in two ways. First, it provides a new threat point - the threat of cross-class cram down. If this works properly then it should help to motivate bargaining. Secondly, Part 26A can be used to impose the commercially reasonable bargain that the dissenting class could have agreed to if cooperative bargaining had been possible, unlocking the situation”.
158. I broadly agree also with Mr Colclough’s further distillation of the above, as follows:
(1) First, Part 26A is to be used when cooperative bargaining has failed. As Professor Paterson put it:
“…we would not expect engagement of a cross-class cram down power without any prior attempt at bargaining - the cross-class cram down power is invoked because cooperative bargaining has not proved possible”.
(2) Secondly, it is for the plan company to explain why the proposed distribution of the benefits of the restructuring is fair. To quote Professor Paterson again:
“…the company would need positively to explain why the proportion of the benefits of the plan that those who stand to gain the most are prepared to share with the dissenting creditors is commercially reasonable”.
(3) Thirdly, the dissenting creditors must explain what they say a commercially fair share is. Quoting her once again:
“… the dissenting creditors would need positively to describe why the proposed compromise or arrangement is unreasonable, and what it is that they would be prepared to accept instead”.
(4) In the round, in considering what is a commercially fair share,
“the search is for the standards of reasonableness that the parties themselves would accept”.
159. The (single) judgment of the Court of Appeal in Re Petrofac, the third in the trilogy, consolidates the departure from Virgin Active. Further, it echoes and re-emphasises the nature of the cross-class cram down power as being to provide recourse against a class which has turned its face against reasonable engagement and/or agreement.
160. Re Petrofac unequivocally marks the demise of the theory propounded in Virgin Active (and in a series of cases thereafter, including cases before me) that the views of “out of the money” creditors can in effect be ignored. The Plan Company’s submission in its original skeleton argument that Thames Water only applied to “bridging” transactions and that “out of the money” creditors in non-bridging transactions “can fairly be given a minimal form of consideration (such as a small cash payment) in return for the discharge of their claims” is not (or is no longer) correct.
161. The Court of Appeal (comprised of Snowden LJ, (who decided Virgin Active), Zacaroli LJ and Sir Christopher Floyd) makes expressly clear in its judgment in Re Petrofac:
(1) At [117], that Thames Water should be read as:
“a clear rejection of the argument based upon Virgin Active. It should also not be read as an indication that in most cases an out of the money class can fairly be excluded from the benefits of a restructuring and need only be given a de minimis amount necessary to satisfy the jurisdictional requirement that the plan should amount to a "compromise or arrangement".”
(2) At [132] to [134], that Thames Water does not only apply to “bridging” transactions:
“[132] Mr Allison's second submission was that the fairness of a plan will be assessed by reference to its purpose, citing Thames Water at §§117-118, §149 and §153. Specifically, he submitted that a different approach is justified where the plan is designed merely to provide a "bridge" (as in Thames Water) from where it is designed to implement a comprehensive balance sheet restructuring (as in this case).
[133] In Thames Water, the Court of Appeal relied on the fact that the plan was intended only to provide a bridge as one of the reasons why regard should be had to the position of the out of the money creditors. The Court was careful, however, to say nothing about when it might be appropriate to have regard to their position if the plan had a different purpose, such as a comprehensive balance sheet restructuring.
[134] While we agree, therefore, that the purpose of the plan is one of the factors to be taken into account, there is nothing in Thames Water which supports the proposition that the impact on the out of the money creditors should carry no or even little weight in the case of a plan designed to implement a comprehensive restructuring of the company's balance sheet.”
162. The Court of Appeal is clear also about the role of pre-plan engagement and negotiations:
(1) At [130], the judgment posits the following:
“…if a class of creditors who would expect to receive a distribution from the realisation of assets in the liquidation wished to obtain the additional benefit of the preservation of the company itself and the value of its business as a going concern, free of the claims of the other creditors, they would have to negotiate with the company and with the classes of out of the money creditors for the latter to give up their claims. That would inevitably require a genuine commercial compromise by all parties.” (underlining added).
(2) At [131], the Court of Appeal analysed the purpose of the cross-class cram down power process:
“[131] … the primary purpose of the introduction of the cross-class cram down power under Part 26A was to allow the Court, in an appropriate case, to override the absence of assent in each class and thereby to prevent any one or more classes of creditors from exercising an unjustified right of veto. The cross-class cram down power was not designed as a tool to enable assenting classes to appropriate to themselves an inequitable share of the benefits of the restructuring. The Court's discretion to refuse to sanction a plan would in such circumstances clearly be engaged.” (underlining added).
(3) At [191] of the judgment, the Court of Appeal (Snowden LJ, Zacaroli LJ and Sir Christopher Floyd) said the following (emphasis added):
“[191] As we have observed (see above at §131), the proper use of the cross-class cram down power is to enable a plan to be sanctioned against the opposition of those unreasonably holding out for a better deal, where there has been a genuine attempt to formulate and negotiate a reasonable compromise between all stakeholders. Our conclusion that the Plan Companies have failed to justify the returns granted in respect of the New Money as a cost of the restructuring means that the formulation of the Plans - and such negotiation as there may have been between the different classes of creditors - has taken place on a false premise. It has failed to address at all the appropriate allocation of such part of the return on the New Money that constitutes a benefit preserved or generated by the restructuring. Moreover, the absence of evidence as to the price at which equivalent funding for the restructured Group could have been obtained in the market means that we could only speculate as to what part of the return on the New Money should be regarded as a benefit of the restructuring, the fair allocation of which falls to be considered.”
163. Thirdly, the Court of Appeal in Re Petrofac confirmed that the burden of proof of establishing fairness is upon the plan Company and proponents of the relevant plan. At [183] the judgment states this:
“[183] As we have said, the burden of establishing that a plan is fair, so as to justify the exercise of the Court's discretion to sanction a plan notwithstanding the presence of a dissenting class or classes, rests squarely on the plan company. Whether it has discharged that burden is a question of fact to be determined on the specific facts of the case. Where, as here, the Plan Companies' own evidence in the form of the valuation of the equity in the restructured Group begs clear questions, then there is a burden on the Plan Companies to provide evidence to meet those questions.”
164. All these points bear directly on the principal
matters
of law which have been in dispute in this case.
(K) Application of these principles and my conclusion as to whether or not to sanction
165. I turn to discuss the application of the law as thus clarified by the Court of Appeal to the present case.
166. In additional submissions following the publication of the Court of Appeal’s decision in Petrofac, Mr Colclough (on behalf of Capricorn) submitted that the Plan was “designed in a pre-Thames world….”; and Mr Ramel (on behalf of HMRC) suggested that the Court of Appeal’s observation (at [172]) that the negotiations that had taken place in that case had “clear echoes of the mistaken approach to out of the money creditors that was rejected in Thames Water…” resonates in this case as well. In my view, there is force in both submissions.
167. The influence on the Plan of the approach in Virgin Active seems to me to be plain. In his skeleton argument for the Sanction Hearing, Mr Bayfield continued to assert that in cases such as the present one where the Plan is put forward as an alternative to a distributing insolvency process, the “starting point for considering the treatment of out of the money creditors is the decision of Snowden J in Re Virgin Active”. On that basis, he persisted in the submission that “‘out of the money’ creditors can fairly be given a minimal form of consideration (such as a small cash payment) in return for the discharge of their claims.” The only nod to Thames Water was the defensive assertion, in the description in that skeleton argument of the “current state of the law (pending the Court of Appeal’s judgment in Re Petrofac)”, that such a ‘de minimis’ payment (as Snowden J described it at [100] in his judgment sanctioning the plan Re Virgin Active [2021] EWHC 1246 (Ch)) “does not involve ignoring the views of the ‘out of money’ creditors: rather it involves distributing the benefits of the restructuring in a way that reflects the position in the relevant alternative…”
168. The judgment of the Court of Appeal in Re Petrofac (published on 1 July 2025) stating (at [117]) that the reasoning on appeal on Thames Water “was a clear rejection of the argument based upon Virgin Active”, made Mr Bayfield’s continuing reliance on the latter case difficult.
169. Nevertheless, and although Mr Bayfield’s Note does signal a retreat from the notion that ‘under water’ creditors are entitled to no more than a de minimis return, and does seek to justify and commend the 5% return which the Plan offers them as “meaningful and guaranteed”, it persists in adopting as the point of comparison what they would receive in the Relevant Alternative, rather than with what they might fairly and reasonably have negotiated for their support in circumstances where it has already been demonstrated that any sale process is likely to fail whilst their debts remain in place. In his further written submissions on Re Petrofac after publication of the Court of Appeal’s judgment, (the Plan Company’s “Note”), Mr Bayfield, by categorising the Plan as a wind down plan, has sought to sideline Re Petrofac, which emphasises the importance of the overall “fairness of the treatment of dissenting classes of creditors under a plan” and makes clear that in such a case, the relevant alternative is “only a starting point” (see [126]), as not really being applicable to anything but plans of the first type described in paragraph [142] above.
170. As indicated previously, I do not agree either with Mr Bayfield’s categorisation of the Plan or (more generally) with his confinement of the decision in Re Petrofac to plans of that first type. Nor do I agree with his valiant effort to attenuate the effect of paragraph [191] in the Court of Appeal’s judgment in Re Petrofac as obiter, and also to counter any suggestion in that paragraph that the cross-class cram down power should not be invoked or deployed unless there has been (to quote the judgment again) “a genuine attempt to formulate and negotiate a reasonable compromise between all stakeholders.”
171. Here, even though the Relevant Alternative is an insolvency process, the objective of the Plan is to realise some economic advantage from the continuation of the Plan Company as a going concern, whether to trade it or to sell it, whereas in a type (2) plan the objective is to save the costs and avoid other tax or fiscal disadvantages of the relevant insolvency process. In my judgment, even if the Plan is not quite within Mr Bayfield’s first category, it is nearer to that than his second category.
172. In any event, in my view, it is clear from Re Petrofac that what falls to be assessed in determining the fairness of the Plan at the discretion stage is whether what the Plan would achieve is a fair and reasonable allocation of the benefits of the Restructuring having regard to the amounts contributed by each creditor class, including the class proposed to be crammed down.
173. Re Petrofac also makes clear that the pattern and results of a previous negotiation between the plan company and the relevant class is likely to offer a very useful perspective on this, both in setting upper limits to the expectations of the dissenting class proposed to be crammed down, and in providing a useful insight into whether the dissenting class has negotiated fairly and reasonably, or whether it has in truth been seeking to extract too much in term of value from its right of veto.
174. As the Court of Appeal emphasised in Re Petrofac, the burden of establishing that the plan proposed is fair rests squarely on the plan company: see [183] in that case and paragraph [163] above. The burden is, at the least, more difficult to discharge where there have been no negotiations and no explanation is offered as to why not.
175. As I have also explained above (see especially paragraphs [53] to [68]), the Plan Company did not engage with either Capricorn or HMRC in formulating the Plan, or indeed at any stage prior to applying to the Court on 27 February 2025 for orders to convene class meetings to consider and approve it. The Plan put forward has been devised between the Plan Company and the Bondholders without any input or involvement from the Unsecured Plan Creditors and without any consideration or even identification of the relevance of what might be a fair allocation to the Unsecured Plan Creditors of the envisaged benefits of the Plan as distinct from what the Bondholders determine arbitrarily to be a suitable amount to pay over the de minimis that unsecured creditors would be entitled to receive in an insolvency process.
176. The failure to enter into any negotiations presents a further difficulty for the Plan Company in terms of there being no evidence that might shed light on whether the dissenting Unsecured Plan Creditors are acting reasonably in demanding more. Furthermore, the obvious implication from the fact that the Plan Company has not offered any explanation for not engaging is that the Plan Company and the Bondholders have proceeded on the basis that they were not required to engage because the Unsecured Plan Creditors were “under water”, consistently with the position pre-Thames Water that “under water” creditors need only be offered a de minimis amount.
177. It will be apparent, but for completeness I confirm, that I do not agree with Mr Bayfield’s suggestion that the Court of Appeal’s judgment at [191] is obiter. The Court of Appeal’s analysis and re-emphasis of the purpose and proper use of the cross-class cram down power was intended to apply and should be applied across the spectrum of Part 26A plans, whether of type (1) (as in Re Petrofac) or a type (2) or (as here) a type (3) case. The guidance in a single judgment of a highly experienced Court of Appeal, plainly intended to have systemic application, is binding on me. In any event, I would not depart from it, even if I were not sympathetic to the view expressed, which (for what it is worth) I am, as may be evident from my decision in Re Ambatovy Minerals Societe Anonyme [2025] EWHC 279 (Ch) especially at [118] (cited with apparent approval in Re Thames Water at [148]).
178. There remains a question, however, as to whether the Court of Appeal has in stating this view, also in effect established a statutory precondition of negotiation before the cross-class cram down power is available.
179. The Plan Company, in submissions adopted also by the SteerCo, chose this as the fulcrum for its argument. Seven points are put forward in the Plan Company’s Note on the Court of Appeal’s Judgment in Re Petrofac, all in support of the overall proposition that the Court of Appeal should not be regarded as laying down a hard-edged rule that it is a precondition of the exercise of the cross-class cram down power that there should have been a sufficient process of negotiation before the presentation of the plan concerned for approval by relevant creditor classes.
180. The overall thesis advanced is that although the fact, pattern and result of negotiations with the dissenting creditors may be useful in determining fairness, this is an evidential issue, rather than one of principle defining and confining the cross-class cram down power.
181. Further, the Plan Company identified what it presented as “the key question” to be, not whether there were negotiations nor what their result was, but rather (to quote the Note):
“…whether the dissenting creditors are unreasonably holding out for more or whether the assenting creditors are appropriating for themselves an inequitable share of the benefits of the restructuring (the “Key Question”)”.
182. The Plan Company submitted that to answer what it promoted as the Key Question it may be useful, but it is not necessary, for the dissenting class to have been engaged in the assessment of the respective sharing of benefits. The Plan Company and “fulcrum” creditors can determine a fair sharing arrangement sufficient to answer the Key Question; and should be taken to have done so in this case where (the Plan Company and the SteerCo repeated again) the dissenting Unsecured Plan Creditors would receive “100 times the return they would recover in the relevant alternative, resulting in likely further impairment to the Bondholders.”
183. I do not consider that I need further rehearse the Plan Company’s arguments in this regard since (a) I would accept that the Court of Appeal’s judgment in Re Petrofac should not be regarded as establishing a jurisdictional precondition of pre-plan negotiations with the dissenting creditor(s) and (b) I do not read the submissions of either Capricorn or HMRC as based on there being such a precondition.
184. The Unsecured Plan Creditors, focused, rather, on the more basic requirement that the Plan should have been calibrated by reference, not to the (now disapproved) de minimis test derived from Virgin Active, but by reference to the requirement (set out in the Re Petrofac decision at [191]) that the Plan Company should have made a “genuine attempt to formulate and negotiate a reasonable compromise between all stakeholders…” with the objective of achieving by the plan “the appropriate allocation of…[any]…benefit preserved or generated by the restructuring.”
185. Put shortly, the Unsecured Plan Creditors’ case was that the Plan had been conceived and promoted by the Plan Company on a false premise, that is to say, on the premise of the Plan Company and the Bondholders being entitled to prescribe to the Unsecured Plan Creditors what any uplift on their entitlement in the Relevant Alternative should be without any consideration, let alone engagement and consideration, of what would be the fair allocation of the benefits of the restructuring to all stakeholders.
186. The position of HMRC seems to me to be summarised in the following paragraphs in HMRC’s further written submissions on Re Petrofac:
“12. What can be taken from Petrofac is that where, as in
Waldorf,
the approach of the plan company has been (1) to start from the hard-edged rule that a de minimis plan return is enough for out of the money creditors, and (2) [to] negotiate on that basis (or, more accurately, not negotiate at all), that is not using the Part 26A cross-class cram down power for the purpose for which it was designed. To put that point another way, mis-using the Part 26A process in such a way is an abuse of the cross-class cram down process…
13. In
Waldorf,
there is no evidence to explain why the plan return to HMRC and Capricorn is set at 5% of their claims. Further, there is no adequate evidence to explain that 5% is all that the plan company can afford to pay. Such negotiations as have taken place in this case have taken place on the false premise that ‘out of the money’ creditors need only receive a de minimis payment.”
187. Capricorn’s further submissions on the Court of Appeal decision in Re Petrofac chime with this, emphasising especially that (a) “there has apparently been no consideration given by the Plan Company as to what is a fair allocation of the benefits of the restructuring” (b) the “5% figure in this case represents a number that the Bondholders were happy with” but which, not being the
product
of any engagement or negotiation with the Unsecured Plan Creditors “is essentially arbitrary”, confirming (c) that “the fundamental problem with the Plan was that it was designed and launched before the Court of Appeal’s judgment in Thames Water…”
188. I agree with HMRC and Capricorn that the Plan appears to have been conceived and promoted on the false assumption of the application of the de minimis test in Virgin Active. What is directly contrary to the guidance given in Re Petrofac is not so much that there were no negotiations with the Unsecured Plan Creditors (though the Court of Appeal certainly expected that there would be in the context of a Part 26A plan), but more that there has been no or no sufficient attempt to consider the fair allocation to all stakeholders, including HMRC and Capricorn, of the benefits expected to be generated by the Restructuring. In particular, there has been no or no sufficient consideration given to assessing what a fair allocation of the benefit should be where the contribution to be made by the dissenting Unsecured Plan Creditors, if the purposes of the Plan are to be achieved, is the enabling of a solvent sale of the Plan Company which could not otherwise be achieved, against the background that in the particular circumstances the Bondholders would, in practice, be unable to enforce their security (see paragraph [119] above).
189. The result is that the figure of 5% has thus been put forward on a false premise and by reference to a flawed comparison, and the evidence put forward to support it almost all comprises a comparison with the position in the Relevant Alternative and faces the wrong way. Further, the failure to engage or negotiate denies the Court an important, perhaps the most important, basis for assessing the fairness (or otherwise) of that figure. This elevates the burden on the Plan Company, making even more difficult any argument that nevertheless 5% is no less than what might reasonably be agreed in a fair negotiation, taking into account that the context of such negotiations would be the threat of a terminal insolvency process in which the Unsecured Plan Creditors would recover a much smaller percentage, as would also the Bondholders.
190. These considerable difficulties are further increased by the fact that, as both the dissenting Unsecured Plan Creditors inevitably (and repeatedly) emphasised, neither the Plan Company nor the SteerCo put forward liquidity or cash-flow forecasts to substantiate their proposition that what the Unsecured Plan Creditors proposed by their Option A (see paragraphs [108] to [110] above) is unaffordable.
191. The only liquidity or cash-flow forecast in evidence was to be found in Ms Rickelton’s Report, in a graph illustrating the Plan Company’s “expected weekly liquidity through to and including week commencing 7 July 2025”. This shows (amongst other things) that “Absent payment of both the EPL and the M&A Creditor, WPUK has positive liquidity through the period 17 February with a USD 4.9m cash low point and a USD 50.5m cash high point.” This appears to contradict what Mr Colclough described as the “bold assertion that it cannot pay $10 million in the context of the [Plan] Company that is turning over half a billion.”
192. Mr Bayfield sought to rely, in answer to this, on (a) a letter from White & Case dated 20 June 2025 (on behalf of the Plan Company) setting out “A number of considerations which currently underpin the Plan Company’s assessment of its available liquidity (and why that liquidity does not permit any additional upfront payment)” by way of justifying both rejection of the Unsecured Plan Creditors’ proposals and the Plan Company’s inability to propose any counter-offer; and (b) evidence given by Mr Tanner in cross-examination to largely the same effect, that is to say that the Plan Company needs to keep available some US$30 million to continue to meet its “top-up” obligations in respect of decommissioning costs, future EPL liabilities and working capital.
193. The impression I formed was that there is something in these points, sufficient to suggest that if there had been reasonable negotiations a figure less than Option A would have been struck: but also that the points made are not sufficiently evidenced and substantiated to justify the conclusion implicitly urged by the Plan Company and the SteerCo (for the Bondholders) that neither can afford any more than the 5% already offered.
194. I have been troubled, of course, by the insistence of the SteerCo that rather than negotiate further or contemplate any material increased percentage, they will accept the likelihood of incurring substantial losses in an insolvency process. I have noted also in that context their reliance on what they have called the principle that secured creditors should not have their security diminished by having to clear off unsecured creditors, and their suggestion that the upholding of the principle is more important to them than the consequence of loss, especially in light of their other ventures and the need to set an example for unsecured creditors in those ventures also. Nevertheless, I do not think it would be right for the Court to defer to these points, especially in circumstances where I consider that: (a) for the SteerCo to prefer a terminal insolvency process (which would risk other participants seeking to assert forfeiture rights in respect of the Plan Company’s valuable licences in successful fields) would be irrational; and (b) the principle suggested is based on a false premise of subversion of the ‘waterfall’. As to (b), in my view, the proposition that the Bondholders accepting an allocation of more than the 5% they have dictated is appropriate would result in a subversion of the proper order between secured and unsecured creditors is misconceived. The proper use of Part 26A requires a differently calibrated offer after sufficient and proper negotiation.
195. In summary, in my judgment, in the particular circumstances I have described, the Plan Company has not discharged the burden on it of showing that the Plan is fair and that it is appropriate, just and equitable (as to which see Re Petrofac in the Court of Appeal at [131]) to exercise the Court’s discretion to sanction it.
196. In those circumstances, it is not strictly necessary for me to consider in detail the general points relating to the disturbing conduct of the Plan Company’s then directors which I have described. Nor is it strictly necessary for me to consider such
matters
as the weight (if any) to be given to the nature of HMRC’s debt and the fact that the indebtedness to Capricorn is in respect of the assets now sought to be monetised for the benefit of the Bondholders. I shall confine myself to the following brief observations:
(1) There seems little room for doubt that the Plan Company’s present financial difficulties are to a substantial extent the consequence of the enormous interim dividend paid in October 2022 on the basis of obviously deficient management accounts. I agree with the submission made by Mr Bayfield, citing the decision of Sir Alastair Norris in In the
matter
of Amicus Finance Plc (in Administration) [2021] EWHC 3036 (Ch), that a sanction hearing is not the occasion to examine these claims in detail, not least because the ordinary processes of disclosure have not been undertaken nor has any of the actors been cross-examined. I note and accept also that these claims are not foreclosed by the Plan. However, Mr Tanner’s negative answer when asked in cross-examination whether he agreed that there is a serious issue to be investigated in respect of the dividend suggests that something of the previous management’s insouciance still survives and may continue to infect the Plan Company’s view of the best interests of all its stakeholders. A similar concern and conclusion applies to Mr Tanner’s negative answer to substantially the same question as regards the Intra-Group Loan.
(2) The deliberate decision (as Mr Tanner accepted it was) not to pay its 2023 EPL Liability, to trade on regardless, without even approaching HMRC for a TTP arrangement whilst instead formulating a restructuring plan premised on cramming down HMRC of which it made no mention to HMRC (or indeed Capricorn) is the antithesis of the fair dealing to be expected of a company seeking to enlist the assistance of the Court in cramming down a dissenting creditor as being a just and equitable solution to that company’s financial difficulties.
(3) Although I agree that the Court should not refuse to sanction a plan simply because HMRC are to be crammed down (and Mr Ramel did not argue otherwise), the fact that HMRC are “involuntary creditors”, together with their particular statement in this case as summarised in (2) above) can, in my view and in accordance with the view of Leech J in In the
Matter
of Nasmyth Group Limited [2023] EWHC 988 (Ch) at [113] to [117], legitimately be weighed in the balance (against a cram down order).
(4) Also, and as both dissenting Unsecured Plan Creditors did stress, the costs so far incurred by the Plan Company and the Bondholders already exceed the difference between Option A and the 5% offered. This casts a yet harsher light on the refusal on the part of the Plan Company and the SteerCo to engage with Capricorn and HMRC with a view to their agreement.
197. The considerations above constitute further factors against sanction; but I should perhaps make clear that the main ground of my conclusion that I should refuse sanction is as summarised in [195] above.
198. Finally, I should also acknowledge my appreciation and concern as to the difficulties now faced by the Plan Company and the Bondholders. Unlike the position in the Re Petrofac case, where the problem was the lack of evidence as to the fairness of the terms for the new funding, and the solution lay in either justifying the existing terms by expert evidence or altering them to conform with market norm, the question now arising in this case is more amorphous. In other words, it is difficult to supply an objective answer in this case (as I suspect will also be so in many other cases).
199. I would nevertheless hope that negotiations may yet yield an agreed amount for the two dissenting Unsecured Plan Creditors; or that if negotiations fail, more detailed analysis of what would be affordable by the Plan Company and the Bondholders would enable the Court fairly to determine the
matter.
200. If a way forward can be fashioned, it should be possible with the support of Capricorn and HMRC, for a revised Plan, with a supplemental or replacement Explanatory Statement, to proceed fairly quickly; and if the Court can assist in the development of an expedited timetable, it seems likely that it would do so.
Postscript
201. After circulating this judgment to the parties (and, subject to particular conditions, to members of the SteerCo) in draft for corrections, and further to paragraphs [198] to [200] above, I permitted further time before finalising and handing down the final judgment with a view to facilitating discussions between them with a view to possible resolution of an agreed revised plan which could then be presented to the Court for expedited class meetings and an accelerated timetable.
202. As I understand the position, negotiations have taken place and are continuing, and the Plan Company has committed to provide (and, indeed, may already have provided) cashflow forecasts to assist in that process. However, the Unsecured Plan Creditors have concluded that more than a short further delay before hand-down would be required; and on the basis that a further plan would be necessary to give effect to any resolution in any event, they have indicated that they are not in favour of any further deferment of formal hand-down.
203. In response, the Plan Company has made clear its intention to seek permission to appeal the decision, and furthermore to apply to the Court for the grant of a certificate pursuant to section 12 of the Administration of Justice Act 1969 (“the AJA 1969”) to enable it to apply for its appeal to be directly to the UK Supreme Court.
204. In the circumstances, I have decided to hand down this judgment without further delay, on the basis of agreed directions for a consequential hearing to be heard within 14 days of the hand down date after the exchange of skeleton arguments on all outstanding issues, including that sought to be raised under the AJA 1969.
205. I adjourn the determination of all consequential
matters
to that hearing in accordance with directions which have been agreed.
[1] The composite definition is adopted in order to make unnecessary any protracted discussion of a claim by CEUK for some US$41.8 million in respect of Earn Out consideration which CEUK maintains remains payable by the Plan Company under the Capricorn SPA (defined in paragraph [11] below) but which the Plan Company maintains has been compromised under a Settlement Agreement (defined in paragraph [13] below). This claim by CEUK is not the subject of the Plan. It is CEPLC which is the entity which (with HMRC) dissents from and opposes the Plan.
[2] The Plan Company also holds a minority shareholding in
Waldorf Energy Holdings, Inc., a Delaware company which does not form part of the WPUK Group and is not an obligor in respect of the Bonds.
[3] For the avoidance of doubt, neither the Plan Company nor any other member of the WPUK Group is an obligor under the WEF Bonds.
[4] As a result of subsequent accessions, 95.85% (by value) of the Bondholders had executed or acceded to the Lock-Up Agreement as at 27 February 2025. No further Bondholders have executed or acceded to the Lock-Up Agreement since that date.
[5] Being on any quarter date, the amount equal to: (1) US$1,250,000, multiplied by; (2) the number of months which has elapsed between the preceding 31 October and such quarter date.
[6] Being on any quarter date, the amount of unpaid EPL liabilities to have been accrued by the Plan Company and its subsidiaries prior to such date and estimated by the Plan Company in accordance with mechanics to be agreed.
[8] Specifically, by letter dated 2 April 2025, CEPLC expressed a concern that the form of the Deed of Release which was appended to the Explanatory Statement would require it, as a Plan Creditor, to procure that its Connected Parties release certain claims against the Plan Company. In order to address this concern, the Plan Company confirmed in a letter from the Plan Company’s Counsel dated 11 April 2025 that it would amend the form of the Deed of Release. White & Case wrote to CEPLC, CEUK and Mayer Brown regarding this amendment on 23 May 2025.
[9] A similar conclusion was also reached in the Part 26 case of Re Lamo Holding BV [2023] EWHC 1558 (Ch), where Leech J held that there was no appetite to reach any alternative deal of the kind suggested by the dissenting parties. Accordingly, a liquidation was the comparator to the scheme: see [92]-[93].