At session six of Riviera’s Offshore Support Journal Conference & Awards in London, Norton Rose Fulbright partner Matthew Thorn surveyed a spate of recent restructuring cases in the offshore sector
Mr Thorn began with an overview of the several restructuring options available for businesses, saying companies may opt for US Chapter XI measures, English schemes of arrangement, Singapore’s new laws or EU measures, among others.
Liquidation analysis was recommended when restructuring plans are drawn up, and consensual measures are preferred to litigious solutions, according to Mr Thorn.
Chapter XI remains the preferred option for large, international companies despite the costs involved, as debtors still retain control of their companies, the option remains open to non-US companies and this court-led process’ stay order is recognised globally.
Meanwhile, the English schemes of arrangement measures, with their reduced costs and lack of all-encompassing insolvency proceedings, are attractive to companies wishing to reduce risks to their reputation.
Of both the Singaporean option and the recent EU restructuring directive, Mr Thorn said it remains to be seen how these would develop as more companies opt for them. The directive has not been implemented across the EU yet, but EU member states are required to transpose it into their national laws by July 2021.
Mr Thorn drew on several high profile restructuring cases – including Tidewater and most recently, Bourbon and noted the trend towards debt for equity swaps. As traditional shipping banks move out, new players will enter the market.
He cautioned that the new entrants are not necessarily playing by the same rules adding “aggressive funds are less likely to treat customers as ‘fairly’ as the old banks".
"Lessors may be willing to enforce guarantees, even if it results in an insolvency filing, as was the case with Bourbon," he said.
A press release from Bourbon in late December 2019 announced a Commercial Court of Marseille ruling that Bourbon’s assets be transferred to a firm owned by French banking institutions on 2 January 2020.
Mr Thorn said early engagement with creditors is key to ensuring companies have as many options available to them as possible, as is abiding by insolvency principles.
“Filing without high levels of support risks failure or a challenge at the very least,” he said, adding that shareholders should be realistic about their returns in a company that is facing restructuring.
Finally, he cautioned that operational issues remain key, otherwise restructuring would be a mere “sticking plaster”.
“Correcting the balance sheet is all well and good," he said. "But if the underlying operational issues are not fixed, the company will continue to decline in a competitive environment.”