“Further, although creditors or shareholders who are likely to be out of the money in the relevant alternative may not have the commercial leverage to contend that they should be paid very much in exchange for their rights, there is no indication in any of the legislative history or from the early Part 26A cases that requiring them to be paid a modest amount to compensate them for the extinction of their debts, or for the cancellation of their shares, would unduly impede the restructuring process.”
“As far as the amount of such payments is concerned … the Plan Creditors … and all of the Plan Members would all be “out of the money” in the event of the relevant alternative, and that their existing rights thus give them no genuine economic interest in the Company. It must follow that, in commercial terms, their existing rights to be surrendered or compromised under the Plan must be regarded as worthless. As such, in my judgment, even the relatively small payments of (a share of) US$10,000 to the Other Plan Creditors, the Subordinated Shareholder Creditors, the Contingent Claims Creditors and the Plan Members must be sufficient to prevent the Plan being an expropriation of their rights without compensating advantage.”
“(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. (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.”
“…the Court is not required to satisfy itself that a particular alternative would definitely occur. Nor is the Court required to conclude that it is more likely than not that a particular alternative outcome would occur. The critical words in the section are what is “most likely” to occur. Thus, if there were three possible alternatives, the court is required only to select the one that is more likely to occur than the other two.”
“In my view, the court should recognise that the directors are normally in the best position to identify what will happen if a scheme or restructuring plan fails. Where the evidence appears on its face to reflect a rational and considered view of the company’s board, the court will require sufficient reason for doubting that evidence.”
“So I think what will happen, and we are starting to see it, we are starting to see embers come that could turn into a fire in the building, that you know, suppliers will start to not ship products to McDermott, they will start to tighten the terms, customers may not make advance payments. That will tighten liquidity on the company. Then if this plan is not sanctioned, we will not have enough time to pursue other alternatives in advance of the March 27 cash collateralisation, that will provide an event of default across the credit facilities. We have heard from Crédit Agricole that they, and they have testified that at that point the extension of the LC facilities is basically dead, and that we are pursuing some type of wind down of the company. Depending on how those facts evolve, how quickly McDermott unravels and you may be familiar with the Carillion case in the UK, that company unravelled very quickly. It’s possible that we could take actions that would slow that down. In that case, a liquidation would not be disorderly, but we may be able to do things to make it more orderly. I believe certain businesses within McDermott, for example Ms Sweeney referenced Tanks. I also believe that the offshore Middle East business and possibly the sub-sea business could be sold as going concerns. I think that the CB&I part of the business is likely unsalvageable, there has not been interest in it and it’s been kind of the toxic part of the group. So I think what that means is that in all of those scenarios, you know, Reficar’s claim is a zero. So the precise dynamics of where it goes, I don’t see as relevant to this proceeding. Maybe it’s relevant to, you know, how I may conduct it, but that’s kind of my view.”
“Q. Could you just assist the court from your experience as a restructuring adviser, on whether [the failure to post US$2.2 billion of cash collateral] is likely to have any impression on how the directors act following a failed plan? A. Yes. I think it would have a significant impression on the minds of individual directors. Clearly, I’m more versed in English insolvency and directors’ duties and matters, but I have got some experience of some overseas jurisdictions as well. But take the English position, it would seem to me, I don’t think it is disputed actually in the case that the company would be insolvent. It would be unable to pay its debts, it would have failed to pay its debts and, therefore, the directors would be very much in what I think is colloquially called the “zone of insolvency” and they would have to have regard to their fiduciary duties and fundamentally, I think, anyone advising them, like myself, or legal advisers would be asking the question of them, “Do you think there is a reasonable prospect of continuing as a going concern because if not you should be filing for insolvency?”