Petrofac Goes to Supreme Court after Restructuring Plan Quashed

Petrofac Ltd. has said it would apply to the United Kingdom Supreme Court for leave to appeal the reversal of a court sanction for the Jersey-based energy engineering company’s financial restructuring plan.

On July 1, in favor of Saipem SpA and Samsung E&A Co. Ltd., the Court of Appeal set aside the High Court of Justice’s sanction for Petrofac’s restructuring plan. Petrofac and the two companies had been part of a failed project – called Clean Fuels Project – to enable the production of cleaner fuels at a Thai refinery.

Claims by Saipem and Samsung and those of other parties to the Thai project “will be compromised” under Petrofac’s restructuring plan, the Court of Appeal said in its decision, published on the UK judiciary’s website.

Petrofac said in a statement last week, “The board has identified and is actively progressing a number of routes to deliver the restructuring, including through a plan that addresses the narrow grounds on which the Court of Appeal issued its judgment on 1 July 2025”.

“Additionally, the Group will today apply to the Supreme Court for leave to appeal the judgment handed down by the Court of Appeal on 1 July”, Petrofac said.

Petrofac expected the restructuring plan to unlock $355 million in new funding, which would “significantly reduce the Group’s indebtedness, materially strengthening its financial position”, as per a company statement May 20.

Late last year Petrofac signed a lock-up deal laying the terms for the restructuring, which included new debt and equity.

The lock-up agreement “formalizes the in-principle agreement announced by the Company on 27 September 2024 with certain key stakeholders including an ad hoc group of holders of senior secured notes and certain other senior secured noteholders, which together comprise approximately 57 percent of the senior secured notes”, Petrofac said in a press release December 23, 2024.

Noteholders have several times extended a forbearance agreement with Petrofac over the company’s failure to pay $29 million in interest.

The lock-up agreement included new funding for Petrofac amounting to $325 million, comprising $194 million of new equity and $131 million of new debt. The new equity issuance would be enabled by the ad hoc group of noteholders, new and existing shareholders and a new investor. The new debt was pledged by the ad hoc group of noteholders, other noteholders and the new investor.

“The company may upsize the new equity issuance by up to $25m in aggregate prior to the restructuring effective date, and it intends to undertake a retail offering of approximately $8m in 2025”, Petrofac said in the December statement.

The restructuring also involved the conversion of about $772 million of existing debt into equity, according to the December statement.

“Post-restructuring total gross debt (including new funding) will be approximately $250m”, Petrofac said then.

Additionally core clients agreed on alternative performance security for certain contracts awarded to Petrofac last year and contracts expected to be awarded after the restructuring.

The restructuring also involved “extinguishing certain historical actual and contingent liabilities including, notably, in relation to the Thai Oil Clean Fuels contract”, Petrofac said December.

Also agreed was a “transformation plan to formalize the construct of the Group’s E&C, ETP and Asset Solutions delivery units”.

Moreover Petrofac’s board would see changes, including the installation of a new chair in 2025.

At the time, a final agreement was yet to be reached on $72 million of new performance guarantee facilities, which would enable the release of $56 million of cash collateral to Petrofac.

On February 21, 2025, Petrofac said it had secured agreements to facilitate the release of $80 million of cash collateral that would be used to secure a performance bond in relation to a key contract. The arrangement replaced the new guarantee facilities.

Petrofac also said in the February update it had decided to “offer certain creditors the opportunity to participate in the equity raise by up to an incremental $25 million, at the same price as other investors”.

“On the restructuring effective date, the existing shareholders of the Company are expected to be allocated 2.2 percent of the Company’s total share capital (versus the 2.5 percent outlined in the 23 December announcement)”, it added.

In the statement last week in which it said it would contest the Court of Appeal ruling before the Supreme Court, Petrofac said, “The Group’s bondholders, investors and those creditors party to the Lock-Up Agreement have reinforced their support for the Group by committing to an extension until 30 November 2025”.

Petrofac chief executive Tareq Kawash said, “The agreement of stakeholders to extend the Lock-Up demonstrates their support for the work underway to address the narrow grounds on which the Court of Appeal upheld the challenge to our Restructuring Plan”.

“While the need for the balance sheet restructuring remains clear, the commitments formalized today give me confidence that we can deliver a successful outcome”, Kawash added.

“Petrofac’s operational capability remains intact, and the business continues to deliver for its clients”, Kawash said. “We have secured new contract awards and have a strong pipeline of future opportunities”.

Petrofac reported $192 million in net liquidity as of the end of the second quarter.

“The Group has been able to maintain liquidity to support its operations, reflecting suspension of debt service payments; commercial settlements and associated collections secured as part of the close out of legacy contracts; supportive supply chain and customer relationships, and careful cash flow management”, Petrofac said.

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