Deepocean I UK Ltd

Hearing dates: Wednesday 13 January 2020

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HONOURABLE Mr Justice Trower

These are my reasons for the order I made on 13 January 2021 sanctioning pursuant to section 901F of the Companies Act 2006 (the “2006 Act”) a restructuring plan in respect of three companies in the DeepOcean group (the “Plan Companies”). The form of the restructuring plan for each of the Plan Companies is contained in a single composite document (the “Restructuring Plan”).

On 15 December 2020, I made an order pursuant to section 901C of the 2006 Act, giving liberty to each Plan Company to convene meetings of its respective Plan Creditors for the purposes of considering and if thought fit approving the Restructuring Plan.

The judgment given at the end of that hearing (the “convening judgment”) is reported under neutral citation number [2020] EWHC 3549 (Ch), and I shall assume that the reader is familiar with it. I shall adopt the abbreviations that I used, and I will not repeat the description of the background which I gave in the convening judgment.

Section 901F of the 2006 Act is contained in the newly enacted Part 26A of the 2006 Act (inserted by Schedule 9 of the Corporate Insolvency and Governance Act 2020 (“CIGA”)). It provides that the court has jurisdiction to sanction a compromise or arrangement in the form of a restructuring plan if a number representing 75% in value of the class of creditors present and voting at the meeting summoned under section 901C votes in favour of the plan. Unlike a scheme of arrangement under Part 26 of the 2006 Act, there is no requirement for a majority by number.

In the present case, the Restructuring Plan was agreed by the statutory majority in value at each of the meetings summoned by DO1 and ES and at the meeting of Secured Creditors summoned by DSC. The Restructuring Plan was not, however, agreed by the statutory majority in value at the meeting of the Other Plan Creditors summoned by DSC. At that meeting the Restructuring Plan was only approved by a number representing 64.6% in value of DSC's Other Plan Creditors, which did not therefore meet the statutory threshold. To this extent the requirements for sanction under section 901F are not satisfied.

However, section 901F(1) is subject to section 901G of the 2006 Act (see section 901F(2)). By section 901G it is provided that:

“(1) This section applies if the compromise or arrangement is not agreed by a number representing at least 75% in value of a class of creditors or (as the case may be) of members of the company (“the dissenting class”), present and voting either in person or by proxy at the meeting summoned under section 901C.

(2) If conditions A and B are met, the fact that the dissenting class has not agreed the compromise or arrangement does not prevent the court from sanctioning it under section 901F.”

This means that the court also has jurisdiction to sanction a restructuring plan if the further requirements of section 901G (in the form of conditions A and B) are met. I briefly alluded to these section 901G conditions A and B in paragraphs 25 and 26 of the convening judgment. They are described in section 901G of the 2006 Act as follows:

“(3) condition A is that the court is satisfied that, if the compromise or arrangement were to be sanctioned under section 901F, none of the members of the dissenting class would be any worse off than they would be in the event of the relevant alternative (see subsection (4)).

(4) for the purposes of this section “the relevant alternative” is whatever the court considers would be most likely to occur in relation to the company if the compromise or arrangement were not sanctioned under section 901F.

(5) condition B is that the compromise or arrangement has been agreed by a number representing 75% in value of a class of creditors or (as the case may be) of members, present and voting either in person or by proxy at the meeting summoned under section 901C, who would receive a payment, or have a genuine economic interest in the company, in the event of the relevant alternative.”

Section 901G therefore introduces a procedure by which a dissenting class can be bound by a restructuring plan. In the Explanatory Notes to CIGA, this is called “cross-class cram down”. It follows from the very nature of the court's powers under section 901G that, while a number of the matters which the court is required to consider are the same as the familiar questions which arise on any application to sanction a scheme of arrangement under Part 26 of the 2006 Act, additional questions arise where the cross-class cram down provisions are engaged and sought to be relied on. As I will explain, these differences include matters going to the court's discretion.

The essential elements of the Plan Companies' creditor constituencies and the reasons underpinning the financial underperformance of the CL&T Group are described in the convening judgment; there have been no material developments since. Likewise, the essential elements of the Restructuring Plan itself are summarised in paragraphs 13 to 18 of the convening judgment and have not changed in any material particular. I should, however, explain what has occurred since the convening hearing and the impact that such events may have had on the correct approach to the application for sanction.

The first relevant event is that, on 16 December 2020 (i.e. the day following the convening hearing), a copy of the document incorporating the Restructuring Plan, the explanatory statement and the notice convening the Plan meetings was made available to Plan Creditors on the plan website. A notice was also circulated to all Plan Creditors known to the Plan Companies as at the date of the order. I am satisfied that the taking of these steps meant that the Plan meetings were summoned in accordance with the convening order.

Secondly, immediately before the Plan meetings were held, DO1 reached a commercial arrangement with the UK Landlord Creditor for the purpose of enabling companies within the DeepOcean Group to continue to store certain equipment at the relevant premises while a potential sale of those assets is explored. This agreement involved another company within the DeepOcean Group (DeepOcean Norway AS (“AS”)) making payment of the outstanding amounts owed to the UK Landlord Creditor pursuant to the terms of the lease.

The third relevant development also took place immediately before the Plan meetings. DO1 reached an accommodation with its two UK Vessel Owner Creditors, one of which, Havila Chartering AS, appeared by counsel at the convening hearing. They were placed in a different class to DO1's Other Plan Creditors because of their rights of ownership in relation to the vessels leased to DO1 and the benefit of the guarantees provided to them by BV.

These arrangements involved the payment by AS to the owner of the Maersk Connector of amounts including the outstanding hire on the vessel, together with the amount of plan consideration to which the owner would become entitled under the Restructuring Plan, in exchange for the owner's agreement to vote in favour of the Restructuring Plan and to withdraw bankruptcy proceedings issued against BV in the Netherlands. The owner was also entitled to take ownership of certain specific assets mobilised or previously deployed on the vessel. The owner assigned to AS its rights to receive plan consideration under the Restructuring Plan.

A similar arrangement was reached with the owner of the Havila Phoenix. In this instance the amounts paid by AS were the amount of plan consideration to which the owner would become entitled under the Restructuring Plan together with an amount equal to its excluded claims in connection with the Moray Firth project that I referred to in paragraph 11 of the convening judgment. There was also an agreement for the transfer to the owner of title to certain specific assets and equipment stored on the vessel. The owner also agreed to discontinue arbitration proceedings pursuant to the relevant charter contract and guarantee given by BV.

The agreements reached with the UK Landlord Creditor and the UK Vessel Owner Creditors were only concluded on the day of (or the day before) the Plan meetings. An announcement giving details of these agreements was made by way of update to the explanatory statement circularised to all Plan Creditors at 9:30 am on 6 January 2021. This announcement was also referred to at the Plan meetings themselves.

It is self-evident that Other Plan Creditors had very little time to consider whether or not these developments had any impact on their consideration of the merits of the Plan Companies' proposals. However no Plan Creditor complained at the Plan meetings (or has done so subsequently) that...