Gulf Keystone Petroleum Ltd (Claimant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 29 September 2016 |
| Neutral Citation | [2016] EWHC 3040 (Ch) |
| Docket Number | Case No: CR-2016004293 |
| Court | Chancery Division |
| Date | 29 September 2016 |
[2016] EWHC 3040 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Rolls Building
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
Mr Justice Newey
Case No: CR-2016004293
In The Matter of:
Mr J Goldring QC and Mr A Goodison (instructed by Paul Hastings (Europe) LLP) appeared on behalf of the Claimant
(As Approved)
I have before me an application by Gulf Keystone Petroleum Limited for a scheme to be sanctioned under s.899 of the Companies Act 2006.
Gulf Keystone Petroleum Limited, to which I shall refer as "the Company", is incorporated in Bermuda and carries on business in the field of oil and gas exploration, development and production with operations in Kurdistan. Its major subsidiary is Gulf Keystone Petroleum International Limited, another company incorporated in Bermuda, which owns and operates the group's principal asset, which is the Shaikan Block in Kurdistan. That company, Gulf Keystone Petroleum International Limited, has been referred to in the course of submissions as "the Guarantor".
The Company is the issuer of two sets of debt securities, $250 million of guaranteed notes and $325 million of convertible bonds. The important difference between the two is that the guaranteed notes are guaranteed by the Guarantor.
In recent years, the group has experienced financial difficulties in consequence of the fall in the oil price and the geopolitical situation in Kurdistan. As a result, it has considered the possibility of restructuring and developed the scheme with which I am now concerned. Under that scheme, the convertible bonds would be swapped into shares representing 20 per cent of the post-restructuring equity. The guaranteed notes would partially be swapped into shares representing 65.5 per cent of the post-restructuring equity and partially reinstated through the issue of $100 million of notes, and there would be an irrevocable waiver of outstanding events of default. A linked element involves an offer to shareholders which, subject to the approval of this scheme, will result in $25 million being raised for 10 per cent of the post-restructuring equity.
A convening hearing was held on 1 September before Warren J. He acceded to the application for a meeting to be convened on the basis that there would be two meetings of scheme creditors: a meeting of the guaranteed noteholder creditors and another of the convertible bondholder creditors.
Those meetings have since been held and very large majorities of creditors have voted in favour of the scheme. So far as guaranteed notes are concerned, 65 noteholders attended (by proxy), representing by value more than $248 million of the notes, and all voted in favour of the scheme. Turning to convertible bonds, 118 holders attended in person or by proxy representing some $318 million of the bonds. All but one of those bondholders voted in favour of the scheme. The one holder who did not held debt of $200,000, whereas those voting in favour held bonds to the tune of $318 million.
I am now asked to sanction the scheme. In that regard, the Company is represented by Mr Jeremy Goldring QC and Mr Adam Goodison. No one else has appeared and, in particular, no one has appeared to oppose the scheme. There has, however, been correspondence with a Mr Geary, the convertible bondholder who voted against the scheme at the meeting, which he asked to be put before me and which has indeed been put before me. In the course of his submissions, Mr Goldring has, to a considerable extent, focused on the concerns raised by Mr Geary.
When deciding whether to approve the scheme, I have first to consider whether the statutory requirements have been complied with. Here, there is no doubt that they have. In particular, meetings have been held in accordance with Warren J's order.
There is more controversy as to the next requirement, namely that the classes were fairly represented. Mr Geary takes issue with that, in particular on the basis that a large number of creditors had subscribed to a lock-up agreement. Unlike some comparable agreements, the lock-up agreement in question does not provide for the payment to creditors of any fees. The feature to which Mr Geary draws attention is the fact that it provides by way of fallback position for those subscribing to it to work together and cooperatively in good faith to seek to effect an "alternative restructuring" in the event of the scheme not being...
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