The High Court has convened meetings for four separate classes of creditors to consider the proposed restructuring of a group of three failing companies. 

The case involved Deepocean 1 UK Ltd, which comprised of three companies providing sub-sea services.

The group had underperformed for several years due to uneconomical charter rates, large and complex projects, changes in the market and more recently the COVID-19 pandemic.

The wider group had decided not to provide further funding, making the operations of the three companies unsustainable.

The companies applied for the court to convene meetings of creditors to consider proposed restructuring plans. They proposed four classes of creditors: 

  1. finance creditors who were the companies’ lenders under a facility agreement, and parties to a lock up agreement that supported the restructuring plans
  2. landlords under leases entered into by one of the companies
  3. UK vessel owner creditors
  4. other creditors excluding those with excluded claims.

The terms of the proposed restructuring plan differed depending on the creditor category but overall, the wider group proposed to introduce funds to enhance dividends otherwise payable.

The court granted the application. It held that where an application was made to convene creditor meetings in respect of proposed schemes, the applicant should take all reasonable steps to notify people of the scheme.

In this case, an advertisement of the proposed plan had been printed in the press. The practice statement letter dealt with all required matters. Sufficient time had elapsed between the announcement and the hearing to enable plan creditors who wished to participate to do so.

The court had jurisdiction as the companies were otherwise liable to be wound up under the Insolvency Act 1986.

The companies satisfied the requirement for the nature of their financial difficulties to be sufficiently serious to give rise to the possibility that they would not be able to carry on business as a going concern. 

Implementation of the proposed restructuring plan would give rise to a better result for plan creditors compared with insolvency.

Please contact Jon Alvarez if you would like more information about the issues raised in this article or any aspect of company law.

Ch D (Trower J) 15/12/2020

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