Petrofac Gets Court Approval for Restructuring but Faces Appeal

Petrofac Ltd. has received approval from the High Court of England and Wales to enforce its financial restructuring plan that would unlock $355 million in new funding.

However, an existing appeal brought by certain creditors connected with the Thai Oil project is contesting the convening order before the Court of Appeal. The appellate court reserved June 2-4 for the review of the appeal, the Jersey-based energy engineering company said in an online statement.

The funding unlocked by the court approval will “significantly reduce the Group’s indebtedness, materially strengthening its financial position”, Petrofac said.

In its latest results report, for the first half of 2024, Petrofac saw a year-on-year increase in net losses of $26 million to $162 million due to “the continued impact of legacy contracts, the challenges in securing performance guarantees and adverse operating leverage”.

Petrofac has deferred the publication of its annual results until after the restructuring effectivity date.

“Together with the support displayed by shareholders, lenders, investors and key clients, the High Court’s sanctioning of the Restructuring Plan confirms it is the best path forward, and follows enormous efforts to develop and implement it over the last 18 months”, said chair René Medori.

“The wider Board and I are conscious of the demands this process has placed on all the Group’s stakeholders”.

Medori also confirmed Aidan de Brunner will leave the board on May 31, having joined to support engagement with stakeholders during the restructuring negotiations.

On December 23, 2024, Petrofac signed a lock-up deal with creditors laying the terms for the financial restructuring, which includes 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 then.

Noteholders have several times extended a forbearance agreement with Petrofac, withholding themselves from pursuing their legal claims over the company’s failure to pay $29 million in interest.

The lock-up agreement includes committed new funding for Petrofac amounting to $325 million, comprising $194 million of new equity and $131 million of new debt. The new equity issuance is enabled by the ad hoc group of noteholders, new and existing shareholders and an unnamed new investor. The new debt is 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 US$25m in aggregate prior to the Restructuring Effective Date, and it intends to undertake a retail offering of approximately US$8m in 2025”, Petrofac said.

The agreed restructuring also involves the conversion of about $772 million of existing debt into equity, “which will significantly deleverage and strengthen the Group’s balance sheet”, Petrofac said. “Post-Restructuring total gross debt (including new funding) will be approximately $250m”.

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

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

Moreover Petrofac’s board will see changes, including the instalment 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 with investors 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 replaces 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.

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