The recent High Court decision in Re Nostrum Oil & Gas plc [2022] EWHC 2249 (Ch) considers a scheme of arrangement where creditors are the target of Russian sanctions. 

Background 

Nostrum Oil & Gas is the English parent company of a group which operates an oil and gas business in Kazakhstan. Due to depleting reservoirs, production had been falling since 2017 and the group was over-leveraged and needed restructuring. Scheme creditors included sanctioned Russian financial institutions which were prohibited from voting and receiving any scheme consideration. The scheme provided that funds would be held on trust for them to claim within 60 days of sanctions ending. 

Decision 

In approving the scheme the judge was satisfied that: 

• this was a fair and proper way to deal with the sanctioned creditors and did not put them at a greater disadvantage than already faced under the sanctions legislation 
• they had signed a lock-up agreement prior to being sanctioned indicating that they did not object to the scheme and even if they had been able to vote, the required majority would have been obtained, and
• the scheme provides a better deal for creditors than the alternative, liquidation. 

This judgment provides helpful guidance for those seeking to restructure companies where creditors are subject to sanction. 

We may see a different outcome where sanctioned creditors are not in support of the restructuring or actively challenge the scheme. 

Find out more 

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