The consideration of the issues relating to TOPOIL begins in one of the three breakout sessions. This one considers whether some sort of restructuring process is appropriate and if so which might be the top options and their relative merits.
The clear view is that a process is required. No surprises there! Chaired by Alastair Beveridge of Alix Partners, three panellists take the stand to debate whether regimes available in their respective countries/regions are best. Jane Dietrich of Cassels Brock and Blackwell puts the case for Canada. Paul Kuiper of Linklaters considers the suitability of schemes (both under UK law and continental European systems) and Rachel Strickland of Willkie Farr & Gallagher argues the corner for Chapter 11.
This is a classic game of “Rock, Paper, Scissors”. There are advantages and disadvantages under each. Canada is a strong contender because outside of Nigeria we are told the group has significant assets in that country and there may be advantages over schemes and Chapter 11 in the provision of a more blanket stay which could help block actions against the directors for fraud, and environmental and health and safety claims. Chapter 11’s worldwide moratorium may provide the most effective and immediate protection against creditor action but there may be questions given the apparent lack of assets in the US. Schemes are relatively flexible and, in comparison to Chapter 11, cheap. But they don’t carry with them an automatic stay – something more is required for that – references are made to the stay awarded in Vinashin (and there are other examples e.g. the moratoriums schemes in Metinvest). But for UK schemes you need creditor votes and voting in classes which can detract from certainty as compared with Chapter 11 and Canadian procedures. Whatever stay is available under any regime, however, it seems unlikely that will achieve the recognition needed to protect the key assets in Nigeria. Everyone agrees they would need to reach out quickly to counsel in Nigeria to assess options locally.
Chapter 11 also carries with it the key benefit of DIP financing, but as that would likely require security over Canadian assets, it may be of limited utility to the extent that might disadvantage Canadian creditors such that the Canadian courts would object.
In practical terms, there may be advantages to schemes. They are not an insolvency procedure and so are less likely to trip termination rights in joint-venture arrangements and local licenses. But to the extent a scheme would need to be combined with a UK administration, the administration would. But would you need Administration as well?
What can the panellists agree on? They all consider that enforcement of share pledges and mortgages is not the way ahead as there will be significant delays getting them through foreign courts and no guaranteed outcome. Good luck to that. Also, whilst acknowledging that combinations of processes are possible, it is recognised that achieving identical effects in different processes in different jurisdictions simultaneously can be cumbersome and inexact. They also acknowledge that when considering jurisdictional COMI issues, one needs to look at the situation on an entity by entity basis, which complicates the picture significantly. They are all nervous of the bondholders in the picture recognising that devising a plan that works for them requires some understanding of their objectives which may well be unclear at the outset – and are in this case study. No doubt, there is more to come on that front.
Was there a conclusion? The panel couldn’t be definitive. The facts were not sufficiently clear for that but then again very often they aren’t. But the session demonstrated overall that one needs to look at what regime best works in the factual scenario. You need to think about whether by combining different processes you could lock in particular beneficial aspects from more than one. You need always to keep an eye on where the assets are, because it is those that you are trying to protect.
So where did it land? The audience vote sided 60% for Chapter 11 and 40% for Schemes.
But the session showed conclusively that the case study has been very well developed with a fact scenario which means that none of the answers will be easy. Hats off to its constructors and to the panellists. There’s a lot more life in this animal.