Petrofac Restructuring Plans Overturned, but Significant Questions Left Unanswered

In a judgment with potentially significant implications for English restructuring plans, the Court of Appeal in London has overturned the approval of the restructuring plans proposed by energy industry service provider Petrofac. Among other things, the court held that, if the economics of new money provided under or in connection with a restructuring plan exceed what could otherwise be obtained in the market, such return should be considered a benefit, and its allocation should be justified. The court also moved away from relatively settled law regarding the treatment of out-of-the-money creditors. The uncertainties created by this judgment may affect the perceived utility of the English restructuring plan for complex financial restructurings, particularly in comparison with U.S. and certain European alternatives.

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