On 27 February 2024, the High Court sanctioned a restructuring plan (the Plan) proposed by CB&I UK Limited (CB&I), part of the global McDermott construction and engineering group (the Group). This is the first English restructuring plan to be approved after the Court of Appeal judgment in Adler (see our Alert) and follows the guidance in that case.

Background 

The Plan, which involved extending maturity dates for secured creditors, was actively opposed by Reficar, an unsecured arbitration creditor, owed over $1 billion, and due to receive a nominal amount under the Plan. 

"No worse off" test 

CB&I contended that Reficar would be "no worse off" under the plan as the most likely relevant alternative would be the break-up of the company through worldwide insolvency proceedings, leaving nothing for unsecured creditors. 

Reficar argued that an alternative fairer deal could be quickly negotiated between the Group, its key stakeholders and Reficar involving the grant of equity in the Group to Reficar before 27 March 2024 when the Group potentially becomes liable in respect of a US$2.2 billion debt. 

Decision

Negotiations during the trial resulted in an offer of 10.9% - 19.9% of the shares in the parent of the Group to Reficar.

The judge criticised Reficar's failure to accept the "generous" offer which demonstrated that its relevant alternative of a quickly negotiated deal was not likely at all and on the balance of probabilities a formal liquidation was more likely. 

The conditions for cram down were satisfied and the judge exercised his discretion in favour of the Plan, as Reficar had secured itself a "fair" distribution of the group's equity.  

The Plan is now dependent on the sanction of two Dutch plans (WHOAs) and Chapter 15 recognition in the US.

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.

Re CB&I UK LTD [2024] EWHC 398 (Ch)