Petrofac, a leading international service provider to the energy and infrastructure industries, saw its restructuring plans overturned when the Court of Appeal delivered a judgment that has sent shockwaves through the restructuring community. The court's decision to uphold an appeal against the contractor's Part 26A plans represents a fundamental recalibration of how UK restructuring law operates.

The implications extend far beyond one company's fate, establishing new standards for fairness, evidence, and creditor treatment.

At 9fin's latest webinar, Petrofac and the next chapter in UK restructurings, our 9fin host Danish Mehboob was joined by Dorian Lowell, (Gleacher Shacklock), Luke Viner (9fin), and Denitsa Stoyanova (9fin) to breakdown the case, and what comes next.

Here are our top takeaways:

1. The "fairness revolution" has arrived

The Court of Appeal has fundamentally shifted the ground rules for UK restructurings by introducing a rigorous fairness test that goes far beyond the statutory requirements. As Dorian Lowell explained, we've moved from a world where senior creditors could effectively "bulldoze through" restructuring plans to one where courts will scrutinise how restructuring benefits are allocated between different creditor classes.

The judgment makes clear that simply offering participation to all creditors isn't enough: it's the proportionality that matters.

This represents a significant shift that rebalances negotiating leverage between senior and junior creditors.

Get the complete 50-minute analysis and expert insights from 9fin and Gleacher Shacklock via the full recording here.

2. Market testing and expert evidence are now essential

Gone are the days when companies could present "hard fought negotiations" with a single new money provider as sufficient evidence of market pricing. The Court of Appeal stated that expert evidence on market testing would be the most obvious way to demonstrate fair pricing for new money.

This creates a new evidential burden that will be "heavily scrutinised," covering how markets are defined, valuation assumptions, and competitive alternatives.

For debt arrangements, this means shadow ratings and spread analysis. For equity, it means rigorous benchmarking against private equity returns and market comparables.

Head here to read 9fin's coverage of the market reaction to the Petrofac bombshell. Our legal team also completed a detailed legal analysis of the Petrofac judgment, but this one is exclusively for clients. To get access, drop us a message at marketing@9fin.com.

3. Work fees under the microscope

The judgment's analysis of work fees reveals a broader skepticism about how ad hoc groups structure their returns. The court was particularly troubled by fees that could jump from £7 million to £30 million (a 400% increase) based solely on post-reorganisation equity valuations, with no corresponding increase in work performed.

As Dorian Lowell put it:

The judgment signals ad hoc groups are going to have to prepare some fairly probative, cogent arguments for justifying those rates.

4. The new negotiating reality

The ruling, Dorian Lowell suggests, may give rise to a new term:

This encapsulates the shift in power dynamics.

Junior creditors now have a credible threat to challenge aggressive restructuring plans, while senior creditors and sponsors can no longer assume they can extract outsized returns without proper justification. The judgment has given dissenting creditors "a better seat at the table" and reset the negotiating balance.

Why this matters now

The Petrofac judgment arrives at a particularly crucial juncture for UK restructuring practice. With economic headwinds intensifying and corporate distress levels climbing, the Court of Appeal's decision to raise the bar for Part 26A plans couldn't be more consequential. The judgment effectively signals that the relatively permissive early days of Part 26A are over, with courts now demanding substantially more rigorous justification for restructuring proposals.

This shift has profound implications for how restructuring professionals approach their work. Practitioners must now prepare for a world where judicial scrutiny is intense with higher evidential standards. For those who understand these new dynamics, however, the opportunity to outmanoeuvre less prepared competitors has never been greater.

The judgment also coincides with the High Court's new Part 26A practice statement, which emphasises earlier creditor engagement and more comprehensive case preparation. As Luke Viner noted, this creates additional pressure on practitioners and plan companies, potentially making restructuring plans "a slightly less attractive option" compared to other European regimes and Chapter 11.

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