UK Restructuring Scheme Case Study: Guiding Bibby Offshore Into Safe Waters

by Latham & Watkins LLP
Contact

UK-based offshore and subsea oil & gas services company solidifies its position and completes ownership transfer to noteholders in major company milestone.

The recent Bibby Offshore recapitalisation[1] is as fair and equitable a restructuring as the media has seen, offering creditors an example of what an effective restructuring requires. This case study exemplifies the key points that companies facing unpredictable market conditions must consider:

  • The correct restructuring solution
  • Deft management of shareholder dynamics
  • Careful handling of stakeholder expectations

Background: Facing Rough Seas

In early 2017, Bibby Offshore’s directors determined that the company’s capital structure had to be right-sized and that additional liquidity was required to meet the challenging market conditions facing the business. The solution was a debt-for-equity restructuring, which involved transferring the shareholding of the company’s parent to Bibby Offshore’s bondholders.

Plotting a Course: Touching the Key Elements

Bibby Offshore engaged the existing shareholder early on in the process to gauge the shareholder’s appetite to put in new money. After several rounds of discussions, it was ultimately Bibby Offshore’s bondholders, recognising the company’s continuing potential to capitalise on new opportunities as and when the market improves, who provided the new money in the form of a £50 million equity injection through a rights offering. Furthermore, one of the bondholders had a controlling position, which considerably eased the path to transactional success. This set of circumstances pointed to a debt-for-equity swap as the natural solution.

Bibby relied on an English law scheme of arrangement to implement the transaction. The scheme is a UK Companies Act 2006 restructuring tool and has become a popular restructuring mechanism for English and foreign companies alike. Clearly, the key to successfully implementing a bond restructuring without unanimous consent is having the ability to cram-in/drag along non-participating bondholders. The scheme offers certainty in this regard (once 75% of those by value and a majority in number of those present and voting, vote in favour) and can even cram in those who did not vote or attend the creditors’ meeting. On the other hand, an exchange offer may not always feasibly achieve this outcome, as was the case here.

Throughout the process, Bibby Offshore had to manage stakeholder dynamics sensitively, especially as the family founders retained the business at that time. Furthermore, prior to launching the scheme, Bibby Offshore had to ensure there would be an orderly transition of shared services to the new ownership. Accordingly, the company entered into a transitional services arrangement with its highly cooperative parent company.[2]

As important as it was to manage the relationship with the company’s (then) current and future shareholders, Bibby Offshore was also mindful to manage carefully its customer base to minimise any operational disruption. For this reason, the board agreed to commence the restructuring in autumn 2017, with a view to completing in early 2018 to coincide with the key contracting period. Although there is hardly ever an ideal time to commence a restructuring, Bibby Offshore was able to point to a fixed timeline, a certain implementation route via the scheme of arrangement process, a debt-free outcome for the company, and significant financial reserves to weather the stormy waters. Latham & Watkins attended calls with Bibby Offshore’s CEO to help present this message to customers. Customers appear to have responded well, and a major customer contacted during the restructuring period awarded a significant contract to Bibby Offshore immediately following the sanction of the scheme and the completion of the transaction.

The Outcome: A Calmer Future

The combination of careful stakeholder management, finding and tailoring the right restructuring solution, and effective restructuring tools, allowed Bibby Offshore to re-enter safe waters, ensuring that it has a strong consolidated position from which to expand in the markets in which it operates. As echoed by Bloomberg’s comment on the transaction: “(….) this is about as fair of a deal for all creditors as I have seen. Parties may differ on what the future holds, but the terms of the restructuring are clear and equitable. This is a text-book restructuring (…)”.

[1] As part of the transition arrangement, Bibby Offshore will re-brand with further details to follow in due course.

[2] With the support of Latham & Watkins and EY, Bibby Offshore (a subsea construction and offshore operational and maintenance support provider) successfully completed a debt for equity restructuring of its balance sheet on 16 January 2018.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Latham & Watkins LLP | Attorney Advertising

Written by:

Latham & Watkins LLP
Contact
more
less

Latham & Watkins LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.