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Will Macadam

McDermott International’s six-day UK restructuring plan sanction hearing closed on Thursday, 15 February, with Mr Justice Michael Green in the English High Court reserving judgment.

“I may, but I don’t give any promise to, notify the parties of the outcome [of the hearing] some point next week… or not,” the judge said. “My judgment will take a little longer.”

Mr Justice Michael Green noted that Mr Justice Leech had adopted a similar approach towards the first-instance Adler Group judgment, which drew criticism from Lord Justice Snowden in his subsequent Court of Appeal judgment.

McDermott, a Houston, Texas-based energy services firm, proposed a UK process, together with a Dutch scheme to cover certain Dutch law agreements, in October to extend maturities on its secured debt facilities by up to three years, while virtually wiping more than $2bn of unsecured debt, comprised of an arbitral award, fines and deeply subordinated contribution claims.

Colombian petroleum refinery Refineria de Cartagena (Reficar) was left as the only opposition to appear before the court to contest McDermott’s plan after a dissenting ad hoc group of Letter of Credit (LCs) holders settled — in exchange for $9m to cover their legal fees, $32.5m cash collateral as participants under the group’s secured facilities, and Series A preference shares in Bermudan parent company McDermott International Limited (MIL) — ahead of the sanction hearing, according to Reficar’s written submissions.

Reficar alleges that McDermott’s restructuring plan is unfair and that the relevant alternative, should its plan not be sanctioned, is not a “doomsday” liquidation scenario but rather would involve short negotiations aimed at settling the group’s dispute with Reficar followed by the relaunch of a restructuring plan.

Our coverage of Day 1 of the hearing and Day 5 is linked.

McDermott approached Reficar with an offer of equity at least twice, once in December 2023 with an offer to settle in consideration for issuance of an equity instrument worth $50m (according to Reficar’s written submissions). The firm offered an equity instrument worth $75m in MIL, in the middle of the sanction hearing, as reported.

Reficar’s board had yet to respond to McDermott’s offer by the end of the hearing.

“It does take time for Columbian entities to make up their mind,” Felicity Toube KC, Reficar’s representative, told the court.

The second offer followed a decision by the Dutch court that the group’s LCs did not count as funded debt and that the court would not approve the group’s restructuring unless Reficar received equity.

Toube unsuccessfully asked the court to adjourn the company’s English proceedings while the group’s Dutch scheme launched to see whether Reficar would approve of the deal.

David Allison KC, McDermott’s representative, argued against adjournment and noted that in cases of “inter-conditionality” it was never clear which court should go first. He added that the company had always anticipated that the UK process sanction hearing would go first.

Allison told the court that the group’s Dutch process would go live on Friday, 16 February, with a voting deadline for creditors set for 24 February; scheme hearings were expected to be held by 5 March with a judgment handed down by 12 March.

Toube noted that, in the absence of further instructions from her client, she could not make further points on the fairness of McDermott’s restructuring plan.

If Reficar turns down McDermott’s offer, it would still be able to receive a 10.9% stake in the group’s parent, which was being offered by the company and its secured creditors under the Dutch process, according to oral submissions from Allison.

Toube suggested in her submissions that the 10.9% offered under the Dutch scheme might be too low. She continued to argue that the relevant alternative was not, as the company had suggested, a liquidation, but a compromise deal with Reficar.

Allison noted it was “difficult to understand what Reficar’s complaint [was]”, in light of the updated equity offer from McDermott.

“The plan company has done its best to reach Reficar,” he noted. “why do Reficar want to kill this plan in this court, knowing full well that the necessary consequence of killing the plan in this court is that they also kill the [Dutch scheme], giving them the very deal they’re asking for?”

Earlier in closing submissions, Mr Justice Michael Green said it was “extraordinary” that, of $250m that had been raised through a transaction to ring-fence the group’s tanks business, about $150m was for the purposes of paying advisors.

“[A] huge amount of money,” he noted.

McDermott is advised by Kirkland & Ellis (legal) in London, with advisors Credit Suisse (financial) and Alvarez & Marsal (restructuring) supporting.

The supportive AHG is represented by Weil (legal), while Crédit Agricole is advised by Linklaters (legal).

Reficar is advised by King & Spalding (legal). The LC AHG used Akin Gump (legal) and Houlihan Lokey (financial).

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McDermott International — An end at last? Day 6

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