REG-Petrofac Limited Petrofac Limited: Petrofac enters Lock-Up Agreement and announces comprehensive financial restructuring
23/12/2024 07:15
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Petrofac Limited ( PFC)
Petrofac Limited: Petrofac enters Lock-Up Agreement and announces
comprehensive financial restructuring
23-Dec-2024 / 07:00 GMT/BST
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE
7 OF THE UK VERSION OF REGULATION (EU) NO. 596/2014 ON MARKET ABUSE, AS IT
FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL)
ACT 2018.
Petrofac enters Lock-Up Agreement and announces comprehensive financial
restructuring
Petrofac Limited (“Petrofac” or the “Company” and together with its
subsidiaries, the “Group”) today announces that it has entered into a
binding agreement (the “Lock-Up Agreement”) with key financial creditors
on the terms of a comprehensive restructuring (the “Restructuring”) to
significantly strengthen the financial position of the Group and enable
Petrofac to deliver its strategy.
The Lock-Up Agreement formalises the in-principle agreement announced by
the Company on 27 September 2024 with certain key stakeholders including
an ad hoc group of holders of senior secured notes (the “Ad Hoc Group”)
and certain other senior secured noteholders, which together comprise
approximately 57% of the senior secured notes. It is part of a
comprehensive restructuring that also involves a new equity raise and
certain agreements with core clients and other counterparties. In
aggregate, the Restructuring will deliver at least US$325m of new funding
to the Group. After repayment of certain obligations, including payments
required to extinguish certain historical claims and contingent
liabilities, and payment of transaction costs, this will result in an
immediate increase in Group liquidity of at least US$195m.
Since announcing a review of the Company’s strategic and financial options
in December 2023, the Directors have considered and evaluated several
alternative options to improve the position of the Group’s balance sheet.
The Directors are of the view that the Restructuring provides the best
available outcome for the Group, its 8,000 strong workforce and its
external stakeholders.
The components of the Restructuring are inter-conditional and certain
elements will be implemented by way of restructuring plans launched by the
Company and Petrofac International (UAE) LLC (“PIUL”) pursuant to Part 26A
of the Companies Act 2006 which will require sanction by the English court
(the “Restructuring Plans”). Shareholders will be asked to approve certain
components of the Restructuring at a General Meeting of the Company, which
is expected to take place in February 2025.
The proposed Restructuring includes the following:
• Committed new funding of US$325m:
◦ US$131m of new debt, with US$94m backstopped by the Ad Hoc Group
and the Additional Noteholders and US$38m committed by a new
equity and debt investor (the “New Investor”); and
◦ US$194m new equity committed by the Ad Hoc Group, the New
Investor and certain other new and existing shareholders.
• The Company may upsize the new equity issuance by up to US$25m in
aggregate prior to the Restructuring Effective Date, and it intends to
undertake a retail offering of approximately US$8m in 2025.
• Conversion of approximately US$772m of existing debt into equity,
which will significantly deleverage and strengthen the Group’s balance
sheet. Post-Restructuring total gross debt (including new funding)
will be approximately US$250m.
• Agreement with core clients in relation to alternative performance
security for certain contracts awarded to Petrofac in 2023 and further
contracts expected to be awarded following the Restructuring.
• Material dilution, while preserving some value, for existing
shareholders.
• Extinguishing certain historical actual and contingent liabilities
including, notably, in relation to the Thai Oil Clean Fuels contract.
• US$72m of new performance guarantee facilities for which discussions
are at an advanced stage, which will enable the release of US$56m of
cash collateral to the Group.
• A transformation plan to formalise the construct of the Group’s E&C,
ETP and Asset Solutions delivery units.
• Changes to the Board and enhanced corporate governance framework
aligned with the aims of the Restructuring.
It is expected that, subject to receipt of all requisite approvals and
satisfaction of conditions, the Restructuring will be completed during Q1
of 2025 (the “Restructuring Effective Date”).
René Médori, Chairman, said:
“We are pleased to have announced today a deal with creditors and other
stakeholders which will materially strengthen Petrofac’s financial
position. We recognise the demands that this process has placed on the
Group’s stakeholders, each of whom is playing a vital role in delivering
this critical step for the business. I would once again like to thank our
shareholders, clients, creditors and employees – we will continue to
depend on your support over the coming weeks as we implement the agreement
and deliver Petrofac’s future growth potential.
“The financial restructuring will mark a new beginning for Petrofac. I
look forward to overseeing the conclusion of this process with a view to
transitioning my Board duties to a new Chairperson in 2025.”
Tareq Kawash, Group Chief Executive, said:
“The agreement announced today will provide a sustainable financial
structure that will support our business plan and allow the Group to move
forward with confidence. Bolstered by our current backlog and pipeline of
opportunities, the business is well positioned as a leading provider of
critical energy infrastructure. We have made good progress in closing out
our legacy portfolio of contracts, our new projects are progressing well,
we have a refreshed strategy focused on our strengths, with enhanced
bidding discipline and project governance.
“I am grateful to our stakeholders for coming together as part of the
Lock-Up Agreement to deliver these stronger foundations for the future and
look forward to leading our exceptional team in pursuit of future
successes.”
Remaining Steps to the Restructuring
The entry into the Lock-Up Agreement and associated agreements represents
the culmination of many months of work. A number of steps are now required
to complete the Restructuring, which is critical for the Company to
continue as a going concern. Each of these steps is inter-conditional, and
so all need to be completed in order for the Restructuring (including the
new funding set out above) to proceed.
The equity raise is being conducted by way of a non-pre-emptive placing,
which in the view of the Directors was critical for the purposes of
announcing a fully committed transaction. The Company values its retail
investor base and is keen to ensure that a broader range of investors have
an opportunity to participate in the Group’s future growth. The Company
therefore intends to announce an offer of ordinary shares to retail
investors to raise approximately US$8m, at the same issue price as the new
equity raise announced today, following the publication of the Company’s
audited financial statements for the year ended 31 December 2024. The
Company also intends to give preferential allocation to those retail
investors who are shareholders on the date of this announcement to the
extent reasonably practicable.
Implementation of the Restructuring requires (among other things) (i)
shareholder approval for components of the Restructuring at a General
Meeting of the Company, which is expected to take place in February 2025;
(ii) the requisite creditor support (in particular from the Group’s senior
secured funded creditors), and sanctioning by the Court of the Group’s
proposed restructuring plans under Part 26A of the Companies Act 2006;
(iii) agreement to secure performance guarantees for certain key EPC
contracts or agreeing to alternative solutions with the clients; (iv) full
and final settlement with HMRC in relation to certain historical claims
against the Group on terms acceptable to creditors who have entered the
Lock-Up Agreement; (v) obtaining non-compromised Thai Oil guarantor
support for the Restructuring; (vi) consent from the Jersey Financial
Services Commission for certain issuances in connection with the
Restructuring; (vii) agreement with guarantee providers to waive defaults
resulting from the Restructuring; and (viii) receipt of proceeds from the
issuance of new ordinary shares and new notes. Further detail on the
conditions to the Restructuring is set out in Section 5(a) below.
Certain shareholders, including each of the Directors, who together hold
in aggregate approximately 37% of the Company’s outstanding share capital
have undertaken to vote their shareholdings in favour of the resolutions
proposed at the General Meeting. The Directors are confident in the
Group’s prospects and, in connection with the New Equity, René Médori
(Chairman), Tareq Kawash (Chief Executive Officer), Afonso Reis e Sousa
(Chief Financial Officer) and David Davies (Non-Executive Director) have
agreed to subscribe for new ordinary shares at the same price as other New
Equity investors for aggregate consideration of US$1.08m.
The lenders under the Group’s existing revolving credit facility and term
loans (together, the “Bank Lenders”) have not yet signed the Lock-Up
Agreement. The Group is progressing discussions with the Bank Lenders to
seek their support for the final terms of the Restructuring. The Group is
aiming to conclude the discussions in the coming weeks. The support of
certain of the Bank Lenders will be necessary in order for the
Restructuring to take place.
All lenders (that is, all holders of the Group’s outstanding senior
secured notes and Bank Lenders (together the “Funded Creditors”)) are
encouraged to accede to the Lock-Up Agreement and participate in the
Restructuring. Section 5 “Participation by Funded Creditors in the Lock-Up
Agreement and the New Money” sets out next steps on how to do this.
1. Reasons for, and purpose of the Restructuring
Reasons for the Restructuring
Under the current management team, Petrofac has made significant progress
having refreshed its strategy to focus on its strengths and enhance
bidding discipline and project governance.
Despite significant progress in rebuilding the backlog in 2023, challenges
with the Group’s legacy portfolio impacted Petrofac’s financial
performance. In particular, the Group’s activities were exposed to adverse
and significantly delayed contractual outcomes and settlements and were
negatively affected by the impacts of the COVID-19 pandemic, leading to
losses on a number of contracts.
This included significant cost overruns on the Thai Oil Clean Fuels joint
venture contract, which have been driving losses at the Engineering &
Construction division (“E&C”) and Group level in recent years. Here, the
impact of the pandemic, together with the scale and unique complexity of
the project and its location, meant that significant additional work and
costs were necessary to recover lost time and complete the project. In
this context, the Group, alongside its joint venture partners, has been in
protracted discussions since 2022 to recover costs incurred.
As part of the Restructuring, the Group continues to seek agreed terms to
continue its participation on the project on a defined and limited basis.
Absent this, the Group will exit the Thai Oil Clean Fuels contract with
associated potential claims and contingent liabilities expected to be
compromised as part of the Restructuring Plans. In this regard, Petrofac
is aware of the announcement made on 20 December 2024 by Thai Oil that its
board of directors has convened an extraordinary general meeting of its
shareholders to consider and approve an increase of the investment cost in
the Thai Oil Clean Fuels Project. Due to the timing of this announcement,
its impact (if any) on the Restructuring remains subject to ongoing review
by the Company
In conjunction with the challenges noted above, a reduced appetite for the
provision of performance bonds and/or advance payment guarantees
(“guarantees”) across the sector, impaired the Company’s ability to secure
guarantees for its engineering, procurement, and construction (“EPC”)
contracts — a standard industry requirement — without the posting of cash
collateral.
These restrictions strained the liquidity of the Group, preventing it from
being able to execute its contract backlog without support from its
stakeholders to resolve both the guarantee requirements and liquidity
needs.
Purpose of the Restructuring
The Directors believe that the Restructuring is critical to deleverage and
strengthen the Group’s balance sheet and liquidity position, as well as to
deliver a sustainable capital structure that will allow the Group to meet
future guarantee requirements and deliver its strategy.
The Restructuring provides a comprehensive solution that involves support
from the Group’s various stakeholders and aims to: (i) protect existing
backlog contracts; (ii) protect the Group from future exposure on the Thai
Oil Clean Fuels contract and certain other historical claims and
contingent liabilities; (iii) support access to future guarantees; (iv)
reduce the Group’s gross indebtedness; (v) restore the Group to a positive
net equity position; (vi) allow for the normalisation of the Group’s
working capital; (vii) improve the Group’s liquidity; (viii) reduce the
Group’s interest costs and (ix) rationalise the Group along operational
lines. The Group expects the Restructuring to provide a foundation for
significant growth in the coming years, as summarised in Section 3
“Financial Outlook”.
The Directors believe that the Group’s ability to continue as a going
concern is contingent on the implementation of the Restructuring. If the
Restructuring is not implemented, the Company would likely enter into
liquidation proceedings. The Board has carefully considered the terms of
the Restructuring (including the resulting equity dilution of existing
shareholders) and believes that the Restructuring is in the best interests
of stakeholders as a whole.
See Section 4 “Other considerations” for an overview of key outstanding
steps to implementation.
2. Overview of the key terms agreed for the Restructuring
The equity allocation following implementation of the Restructuring is
summarised in the table below. 1 1
Stakeholder Equity allocation
Funded Creditors (New Money providers) 50.0%
Funded Creditors (debt-for-equity) 17.3%
New equity and debt investor 12.5%
Other New Equity investors 17.8%
Current Shareholders 2.5%
The key terms of the Restructuring steps are summarised below. Each
component of the Restructuring is inter-conditional with the other
components.
a. New Money
The Group has secured new equity and debt commitments as set out below
(the “New Money”).
New Equity
US$194m of commitments to subscribe for ordinary shares in the Company
(the “new ordinary shares”):
• US$94m backstopped by the Ad Hoc Group and certain other senior
secured noteholders (the “Additional Noteholders”), in exchange for
26.7% of the post-Restructuring share capital of the Company (before
accounting for any fees paid as new ordinary shares);
• US$38m committed by the New Investor, in exchange for 10.7% of the
post-Restructuring share capital of the Company; and
• at least US$62m to be subscribed for by certain existing shareholders,
including Directors of the Company, and new investors in exchange for
17.8% of the post-Restructuring share capital of the Company
(together, the “New Equity”).
• The Company may upsize the New Equity issuance by up to a further
US$25m.
In aggregate, taken together with the new ordinary shares to be issued (i)
in connection with the debt-for-equity swap (see Section 2(b) below), (ii)
to Funded Creditors that subscribe for the New Money Notes (see “New Money
Notes” in this Section 2(a)) and (iii) in respect of the backstop fees
(see Section 2(i) below), 20,550m new ordinary shares are expected to be
issued on completion of the Restructuring representing 97.5% of the
Company’s share capital. This will result in a significant increase in the
issued ordinary share capital of the Company and consequently existing
holders of the ordinary shares will experience material dilution.
As consideration for backstopping their portion of the New Equity, the Ad
Hoc Group and the Additional Noteholders will receive a backstop fee, paid
in part by the issuance of new ordinary shares, as described further below
in section 2(i).
All Funded Creditors will be entitled to participate in the backstopped
New Equity, provided they also participate in the New Money Notes on a
fixed ratio of 50/50 (the “Funding Ratio”) between New Money Notes and New
Equity (see “New Money Notes” in this Section 2(a), Section 2(i) and
Section 5 below).
In addition, the Company has agreed to issue two classes of warrants over
ordinary shares to existing shareholders who have committed to subscribe
for ordinary shares as part of the New Equity, but excluding Directors,
(the “Existing Shareholder Investors”) for nil consideration. The key
terms of the warrants are summarised below.
Tranche 1 Tranche 2
48 warrants for every 100 new 28 warrants for every 100
Allocation ordinary shares subscribed new ordinary shares
for subscribed for
5 years from the 5 years from the
Duration Restructuring Effective Date Restructuring Effective
Date
Subscription price Nil Nil
Subscription right Each warrant will give the holder the right to
subscribe for 1 ordinary share
Upon the Company reaching the applicable Threshold
Exercise Market Capitalisation (based on a 30-day GBP
volume-weighted average share price), prior to the end
of the applicable warrant term
Threshold Market US$1.30bn US$1.95bn
Capitalisation
New Money Notes
US$131m (before original issue discount (“OID”) and backstop fees) (the
“New Money Notes”) of debt funding in the form of new super senior secured
notes, with US$94m backstopped by the Ad Hoc Group and the Additional
Noteholders and US$38m committed by the New Investor.
As consideration for backstopping their portion of the New Money Notes,
the Ad Hoc Group and the Additional Noteholders will receive a backstop
fee, paid in part by the issuance of additional New Money Notes, as
described further below in section 2(i).
As noted above, all Funded Creditors (and certain other existing secured
guarantee providers) will be entitled to participate in the backstopped
New Money Notes (see Section 2(i) and Section 5 below).
The New Notes (being the New Money Notes together with the Reinstated
Notes (as defined in Section 2(b) below) will be issued by a newly
incorporated subsidiary that will become the holding company of the
Group’s Asset Solutions division and have the following key terms:
• total quantum of up to US$250m, taking account of (i) 7.5% OID and
7.5% backstop fee on the US$133m New Money Notes and (ii) the US$96m
Reinstated Notes (see Section 2(b) below);
• maturity date of 30 June 2030;
• 9.75% p.a. payment-in-kind (“PIK”) interest and/or cash interest (or
combination) at the Company’s discretion in year one and 9.75% p.a.
cash interest thereafter (payable on a semi-annual basis (commencing 6
months from the Restructuring Effective Date));
• super-senior priority over an enhanced common guarantee and security
package, which will include a share pledge over a new intermediate
holding company of the Group;
• proceeds from the New Money Notes will be paid into a segregated
account and must be used in accordance with a pre-agreed proceeds
usage plan, subject to compliance with agreed liquidity tests and
certain key milestones agreed as part of the development of the
delivery unit separation plan (see Section 2(g) below);
• semi-annual sweep of Assets Solutions cash balances over US$50m,
with 80% to be applied towards redeeming the New Notes, to apply
from completion of the delivery unit separation;
• Group minimum liquidity test, set at US$40m 2025, US$55m H1 2026
and US$75m thereafter;
• total funded debt post-Restructuring will be capped at US$279m,
excluding interest and debt incurred pursuant to agreed baskets
(note: if the non-compromised Thai Oil guarantee is called and
the guarantor’s claim is reinstated on a senior basis before 31
December 2025, up to c. US$19m of New Notes will be released in
exchange for new ordinary shares in the Company);
• Asset Solutions net debt / EBITDA covenant (applying post
separation only) of 4.6x in 2026, 4.2x in 2027 and 4x in 2028, to
apply from completion of the delivery unit separation;
• From the Restructuring Effective Date, a restriction on the
transfer of assets from Asset Solutions to non-Asset Solutions
Group entities, which, with effect from completion of the
delivery unit separation, shall also apply to cash; and
• restrictions on the payment of cash dividends (including the use
of Asset Solutions cash, following completion of the delivery
unit separation) until the New Notes are fully repaid.
Funded Creditors that subscribe for the New Money Notes will also receive
new ordinary shares constituting 17.9% of the post-Restructuring share
capital of the Company as additional consideration for their New Money
investment.
b. Debt Restructuring
Debt-for-equity swap
Approximately US$772m of outstanding debt under the Company’s revolving
credit and term loan facilities and its senior secured notes (the “Funded
Debt”) will be converted into new ordinary shares constituting 17.3% of
the post-Restructuring share capital of the Company.
Reinstated Notes
Funded Creditors who participate in the New Money Notes will receive, for
every US$1 of participation, reinstatement of US$0.81 of their Funded Debt
as super senior secured notes (the “Reinstated Notes” and, together with
the New Money Notes, the “New Notes”), subject to any adjustment to the
reinstatement ratio in connection with the provision of New Guarantee
Facilities, the Thai Oil non-compromised guarantor claims and the Thai Oil
Guarantee Claims.
Reinstated Notes will also be issued to Funded Creditors (and certain
other existing creditors) that participate in New Guarantee Facilities
(see Section 2(c) below).
c. New Guarantee Facilities
As of the date of this announcement, the Company is in advanced
discussions with an existing Funded Creditor to provide US$72m of New
Guarantee Facilities for a major E&C project. In consideration, the Funded
Creditor will receive, in respect of their Funded Debt, a partial cash
repayment (c.US$19.6m) and partial reinstatement as Reinstated Notes
(c.US$19.6m).
Funded Creditors and certain other creditors of the Group will also be
invited to participate in providing New Guarantee Facilities for a second
EPC contract in amount of €50m. For every US$1 of such New Guarantee
Facilities commitments, participants will receive:
• in the case of Funded Creditors, cash repayment of US$0.26 and
reinstatement of US$0.26 of their Funded Debt (as described above);
• in the case of the Thai Oil guarantee providers, (i) US$0.26 cash
repayment and (ii) US$0.26 reinstatement as Reinstated Notes of their
contingent claims in connection with the Thai Oil Clean Fuels Project
(if and when they crystallise) net of any cash collateral applied by
the relevant creditor; and
• in the case of Unsecured Guarantee Creditors, the elevation of US$1 of
their existing unsecured guarantees to senior secured ranking
(“Elevated Existing Unsecured Guarantees”).
The New Guarantee Facilities will be issued on terms customary for
facilities of this nature, and will be subordinated to the New Money
Notes, but rank pari passu with all other senior secured debt over the
common guarantee and security package. The New Guarantee Facilities in
respect of the first major E&C project will benefit from the ring-fencing
arrangements noted below (see Section 2(d) below).
d. Key Client Arrangements
As part of the Restructuring, the Group has revised the terms of the
US$14bn multi-year framework agreement with TenneT in relation to the
Group’s work alongside Hitachi Energy on a series of offshore wind
projects (the “TenneT Framework Agreement”). The revised arrangements
include a more gradual build-up of the performance security requirement
over the life of the TenneT Framework Agreement and the ability to meet at
least part of that security through retentions rather than performance
guarantees. These arrangements will apply until 31 December 2026,
following which performance security will be required in the form of
guarantees.
In exchange, future payments made by TenneT will be ring-fenced and used
exclusively for costs associated with the TenneT contracts (including
services provided by other Group entities), and transfers outside of the
ring-fence will only be permitted for transfers of certain profits and
overhead to the Group, alongside limited additional amounts of excess
liquidity.
In addition, the Group has agreed revisions to its agreements with ADNOC
in relation to the provision of guarantees. The revised arrangements
include an extension, for 18 months from the date that the Restructuring
becomes effective, of the period to provide guarantees for one contract.
In exchange, future payments made by ADNOC to the Group on the two
contracts awarded in 2023 will be paid into ring-fenced bank accounts and
used exclusively for costs associated with those contracts, including
services provided by other Group entities, and for transfers of overhead
to the Group.
e. Settlements and arrangements regarding certain claims and contingent
liabilities
As part of the Restructuring, the Group has agreed settlements and/or will
seek to settle and/or compromise certain historical claims and contingent
liabilities required under the terms of the Lock-Up Agreement and as
summarised below:
Consensual settlements
• HMRC: In October 2020, HMRC issued a decision pursuant to section
8(1)(c) of the Social Security Contributions (Transfer of Functions,
etc.) Act 1999 (the “Decision”) in respect of Petrofac Facilities
Management Limited (“PFM”), a subsidiary of the Company. Under that
Decision, PFM was liable to pay secondary Class 1 national insurance
contributions for the period 6 October 1999 to 5 April 2014. PFM has
appealed that Decision and disputed the liability. Since October 2024,
PFM has been engaged in positive discussions with HMRC with a view to
a possible settlement of the Decision and PFM’s appeal (the “NIC
Dispute”). The final terms of any settlement of the NIC Dispute remain
the subject of on-going discussions between HMRC and PFM. It is a
condition of the Lock-Up Agreement, that a full and final settlement
of the NIC Dispute is concluded before the Restructuring Effective
Date and that such settlement is on terms acceptable to the creditors
who have signed the Lock-Up Agreement. If, as the Company hopes, PFM
is able to reach a settlement with HMRC which is acceptable to the
creditors who have signed the Lock-Up Agreement, the Company expects
that the settlement will shortly be concluded.
• Thai Oil non-compromised guarantor claims: The Group is in the process
of concluding negotiations with a non-compromised guarantor regarding
discharge of any claims it may have against the Group as a result of a
demand by Thai Oil Public Company on the performance bonds issued by
the guarantor in support of the Group’s obligations in respect of the
Clean Fuel Project. To the extent that such claims were to
crystallise, the claims will be reinstated (net of cash collateral
applied in partial satisfaction of such claims) as senior secured debt
of up to US$49m, maturing after the maturity of the New Notes.
Compromise of certain historical claims and contingent liabilities
Certain historical liabilities of the Company and PIUL will be
compromised, subject to implementation of the Restructuring Plans (see
Section 4(a) below) (unless settlements are subsequently agreed). These
include:
• claims of existing and former shareholders (against the Company)
seeking damages under s90A of FSMA 2000, which concerns the making of
allegedly false, misleading or delayed statements and/or material
omissions in public disclosures. Claims will be released in exchange
for a share of a shareholder claims fund. Further detail will be
provided as part of the Restructuring Plans;
• actual or potential claims (against the Company and PIUL) in
connection with the Thai Oil Clean Fuels contract by Thai Oil Public
Company, Saipem or Samsung entities (and PSS Netherlands BV as a joint
venture entity) that are party to the project contracts. Claims will
be released in exchange for (in respect of Company claims) a share of
a non-shareholder claims fund and (in respect of PIUL claims) cash
payment or (at their election) new ordinary shares benchmarked against
expected recoveries in an insolvency (with the equity entitlement
capped at a further 1% of the post-Restructuring share capital, being
issued following completion of the Restructuring, and any excess paid
in cash);
• any claims that the Thai Oil guarantee providers, other than by the
non-compromised Thai Oil guarantor, may have against the Group
pursuant to guarantee arrangements to fund the Group project-related
obligations (the “Thai Oil Guarantee Claims”), which would be
discharged (net of cash collateral deemed applied in partial
satisfaction of such claims) in exchange for new ordinary shares
(capped at a further 1.21% of the post-Restructuring share capital,
being issued following completion of the Restructuring), subject to an
election to participate in the New Guarantee Facilities (per Section
2(c) above) or (if applicable as part of the Restructuring Plan) the
New Money;
• any claims of the Group’s insurers against the Company for the return
of all insurance proceeds received under certain historic D&O
insurance policies allegedly based on policy avoidance grounds. Claims
will be released in exchange for a share of the non-shareholder claims
fund; and
• claims that may be brought by former directors or managers of the
Group against the Company arising out of or in connection with the
shareholder claims (above) or the SFO Investigation, including certain
potential contribution or indemnity claims. Claims will be released in
exchange for a share of the non-shareholder claims fund.
The Company expects that the aggregate initial outflows required to settle
and/or compromise these historical claims and contingent liabilities will
not exceed US$25m from the proceeds of the Restructuring, with certain
other payments to be made in the future. Further details on the terms of
these compromises will be provided as part of the Restructuring Plans
process.
f. Other Stakeholders
Current Shareholders
As a result of the Restructuring, including the conversion of the Group’s
debt to equity, current Shareholders will be diluted through the resultant
issuance of new equity in the Company, such that existing Company
Shareholders will hold approximately 2.5% of the post-Restructuring share
capital of the Company.
Other Guarantee Facilities / Sureties
Other guarantee facilities, surety facilities or similar instruments that
are not currently subject to the intercreditor agreement (but which may
have their own security / guarantees) will not be amended or compromised
by the Restructuring, but may become Elevated Existing Unsecured
Guarantees if the relevant creditors agree to provide New Guarantee
Facilities (see Section 2(c) above). In addition, the Group will be
required to procure waivers from guarantee providers for defaults arising
as a result of the Restructuring.
g. Alignment of Delivery Units
Prior to the Restructuring Effective Date, the Company will finalise its
plan to formalise the legal and operational separation of its delivery
units (E&C, Energy Transition Projects (“ETP”) and Asset Solutions). This
separation will help the relevant delivery units of the Group that require
access to guarantees to be able to access and procure them more easily in
future. On or before closing of the Restructuring, the Company will
establish a Transformation Committee and appoint a Chief Transformation
Officer (“CTO”) to oversee implementation with the aim of completing this
work as soon as possible after the Restructuring Effective Date in
accordance with determined milestones.
Upon completion (and subject to certain agreed terms), the New Notes will
continue to be secured on the Asset Solutions sub-group and will benefit
from a cash sweep and other covenants from that sub-group, but will
release security and guarantees granted by entities within the E&C and ETP
delivery units.
h. Governance and Management Incentives
The Ad Hoc Group (in consultation with the New Investor) will have the
right to approve the composition of the Board to be established on the
Restructuring Effective Date. The Board is expected to comprise:
• at least 2 executive directors (being the Chief Executive Officer and
Chief Financial Officer); and
• at least 4 independent non-executive directors, including the
Chairperson.
The Company’s current Chairman, René Médori, will continue in his role
during the implementation of the Restructuring in order to guide the Group
through the process, and will lead a transition to a new Chairperson in
the course of 2025, with a period of overlap to ensure the Group’s
stability as it emerges into its new capital structure.
Given the changes to the Group’s capital structure through the
Restructuring, the Board and Group governance and executive function will
adapt to the post-Restructuring business plan, including the establishment
of the Transformation Committee and the appointment of the CTO.
Following the Restructuring, the Company intends to put in place a
management incentivisation programme, which could result in awards not
exceeding 10% of the share capital of the Company.
i. Lock-up Agreement and other commitment agreements
Lock-up Agreement
The Group’s Bank Lenders have not yet signed the Lock-Up Agreement. The
Group is progressing discussions with these Bank Lenders to seek their
support for the final terms of the Restructuring. The Group is aiming to
conclude the discussions in the coming weeks. The support of certain of
the Bank Lenders will be necessary in order for the Restructuring to take
place.
Each Funded Creditor that accedes to the Lock-Up Agreement by 10 January
2025 (or acquires funded debt that was locked up as of 10 January 2025)
will be entitled to an early bird fee constituting 0.25% of its funded
debt that was locked up as of 10 January 2025. The early bird fee will be
payable in cash at completion of the Restructuring.
All Funded Creditors will be invited to participate in the new funding
backstopped by the Ad Hoc Group by providing commitment letters no later
than one business day after the date of the creditor’s meetings that are
expected to be held in the second half of February 2025 to vote on the
Restructuring Plans.
Pursuant to the terms of the Lock-Up Agreement, all creditors party
thereto undertake to support the implementation of the Restructuring,
including but not limited to voting in favour of the Restructuring Plans,
subject to the meeting of key milestones as set out in the Lock-Up
Agreement and certain customary termination rights.
In addition, the Lock-Up Agreement provides for waivers of any defaults
under the Group’s revolving credit facility, term loan facilities and
senior secured notes triggered by the Restructuring, as well as the
temporary forbearance from enforcing their debt claims in connection with
non-payment of interest, principal and other fees under these instruments.
Backstop Agreement
The Company has entered into a backstop agreement with certain members of
the Ad Hoc Group and the Additional Noteholders (the “Initial Backstop
Providers”), pursuant to which the Initial Backstop Providers will
backstop US$187.5m of Funded Creditor participation in the New Money Notes
and New Equity. In consideration for their service, the Initial Backstop
Providers will be paid a pro rata share of a backstop fee of (i) 3.75% of
the aggregate amount of debt funding backstopped, which will be satisfied
by the issuance of New Money Notes, and (ii) 3.75% of the aggregate amount
of equity funding backstopped, which will be satisfied by the issuance of
additional new ordinary shares (constituting 1.67% of the Company’s share
capital post-Restructuring). Backstop fees will be paid at completion of
the Restructuring.
Funded Creditors will also be invited to accede to the Backstop Agreement
and provide backstop commitments up to their pro rata share calculated by
reference to the Funded Debt held by such Funded Creditors (with the
corresponding reduction of the backstop commitments of the Initial
Backstop Providers). Funded Creditors that accede to the Backstop
Agreement by 10 January 2025 and the Initial Backstop Providers will be
paid a pro rata share of an additional backstop fee of 3.75% on the amount
of debt funding and equity funding backstopped by such Funded Creditors
and the Initial Backstop Providers, satisfied by the issuance of new
ordinary shares (constituting 1.67% of the Company’s share capital
post-Restructuring) and the issuance of additional New Money Notes on the
Restructuring Effective Date.
3. Financial Outlook
The Board firmly believes that the Restructuring will significantly
improve the Group’s financial stability, strengthen its balance sheet and
increase access to guarantees to support the delivery of the Group’s
strategy. This stronger platform, taken together with a more selective
approach to bidding and comprehensive efforts to extend and embed
assurance procedures and cash flow discipline, will support the Group’s
efforts to achieve consistent project execution for predicable deliveries
as well as appropriate commercial settlements on legacy contracts. The
Group anticipates that, along with its strong backlog and pipeline of
opportunities, its established operating capabilities and renewed focus on
core jurisdictions and project types where the Group has a strong track
record will support significant improvements in financial performance in
the medium term, reversing the financial and operational challenges
experienced by the Group in recent years.
On this basis, the Group expects to achieve its medium-term ambitions of
US$4 billion to US$5 billion of revenue, and build to sector-leading EBIT
margins in the medium term. This would see annual Group revenue more than
double over the period to 31 December 2027 (the “period”), supported by
year-on-year revenue growth across the Group and within each of its E&C
and Asset Solutions operating divisions. By leveraging the opportunities
in its pipeline, the Group projects backlog to grow to over US$15 billion
by 2027 and is expected to deliver improved performance year-on-year:
• The Group’s E&C operating division is expected to observe a higher
rate of revenue growth over this period, with approximately 50% CAGR
from 2024 levels (based on annualised H1 2024). This is expected to be
driven through selective bidding and disciplined execution. This
includes a strategic refocus on core MENA jurisdictions and clients on
traditional hydrocarbon projects within the Group’s core competency
areas—oil and gas gathering and processing facilities, now also
including petrochemical projects—and offshore wind for energy
transition projects, with win-rates expected to revert to historical
levels (i.e., excluding the pandemic and periods during which it has
been restricted from bidding in certain jurisdictions). Revenues are
expected to be split broadly evenly between traditional hydrocarbon
and energy transition projects.
The E&C division is expected to return to profitability early in the
period, as increased activity levels on new contracts (secured in 2023)
outweigh overhead costs and the reducing impact of legacy contracts. In
the medium term, profitability is expected to increase to mid-to-high
single-digit EBIT margins, as the higher quality backlog contracts,
particularly in offshore wind, which are also lower risk due to their
partially reimbursable pricing structure, have an increasing impact,
whilst activity levels take the division to optimal operating scale.
This strategy is underpinned by a strong backlog and pipeline of
opportunities in its core regions and target markets. The pipeline
includes a further four HVDC offshore wind projects expected to be awarded
in the period under the TenneT Framework Agreement.
• The Group’s Asset Solutions operating division is expected to increase
annual revenue, achieving a low-double digit CAGR over the period from
2023 levels, leveraging its existing backlog and from continued
success in delivering new order intake from a healthy pipeline of
opportunities. The division is seeking to improve the bottom-line
profitability, with EBIT expected to return to slightly higher than
2021/22 levels (in US$ value terms) in the earlier part of the period,
resulting from the targeting of further higher-margin contracts in
less mature basins.
The Group’s target performance for Asset Solutions reflects the multi-year
impact of recent contract wins and extensions, which includes notable wins
delivering geographical expansion in Turkmenistan, West Africa and the
Gulf of Mexico, also resulting from the strategic focus on integrated
activities and late life asset management and decommissioning.
• The Group’s Integrated Energy Services division (“IES”) revenue is
expected to deliver low single digit percentage of E&C and Asset
Solutions combined revenue during the remaining life of the asset,
with anticipated natural declines in crude production at the field,
until the end of its contract period in 2026. EBITDA is expected to be
less than 2% of total Group revenue early in the period, and
decreasing for the asset’s remaining lease, with depreciation and
amortisation expected to be in a similar range.
The Group’s ability to grow revenue in its E&C division through new order
intake from EPC contracts, into the medium term, and realising its
potential, will be significantly dependent on its ability to source
adequate guarantees on commercially acceptable terms or, potentially,
agree alternative arrangements with clients. The Group expects that the
Restructuring will permit it to gradually re-enter the market for these
guarantees from the second half of 2025.
The Group expects to generate a small positive net cash flow for the year
ending 31 December 2025, at a Group level, improving its liquidity,
largely reflecting inflows from the Restructuring, partly offset by
working capital normalisation across the business. Beyond this, net cash
flows are expected to be materially above EBITDA, driven by the
improvement in activity levels in the E&C division, as described above,
with profitable contracts; benefitting from positive working capital on
EPC contracts, even without assuming the receipt of advance payments on
new contracts.
The Restructuring is expected to provide a sustainable platform to meet
these ambitions. However, the outlook set out above may prove to be
incorrect, including for the reasons set out in Section 4(d) “Risks to
implementation of the Restructuring and Financial Outlook” and under the
heading “Cautionary statement regarding forward-looking statements”. If
these risks materialise or the Group otherwise fails to achieve its
anticipated financial performance, this could negatively impact the
Group’s profitability or liquidity position, including in the short term.
The Board recognises the importance of dividends to shareholders and
expects to reinstate them in due course, once the Company's performance
has improved.
4. Other considerations
a. Implementation of the Restructuring
The Company intends to complete the Restructuring in Q1 2025 and implement
this through two concurrent Restructuring Plans pursuant to Part 26A of
the Companies Act 2006 to be proposed by the Company and PIUL. Pursuant to
the Restructuring Plans, certain historical liabilities and contingent
liabilities of the Group will be compromised or settled, and claimants
will be entitled to submit claims for admission and adjudication which, if
successful, will entitle them to a share of settlement funds that will be
set up by the Group, as further described in Section 2(e) above and in the
restructuring documentation to be shortly published.
The current expected timetable of the Restructuring Plans and
Restructuring as a whole is:
• Convening Hearing: 28 January 2025
• Publication of the Prospectus and General Meeting Shareholder
Circular: January 2025
• Creditor Meetings: week commencing 17 February 2025
• General Meeting: prior to 25 February 2025
• Sanction Hearing: 25 February 2025
• Restructuring Effective Date: on or around 28 February 2025
The shareholder circular and notice of general meeting (the “Circular”)
for the General Meeting of the Company, which is expected to take place in
February 2025, will be distributed at least 14 clear days prior to the
date of the meeting. Certain shareholders, including each of the
Directors, who together hold in aggregate approximately 37% of the
Company’s outstanding share capital have undertaken to vote their
shareholdings in favour of the resolutions proposed at the General
Meeting.
The Company will also be required to publish a prospectus in connection
with the admission of the new ordinary shares to be issued in connection
with the Restructuring to the equity shares (commercial companies) segment
of the Official List (the “Prospectus”). The Company anticipates
publishing the prospectus around the same time as the Circular subject to
it being approved by the Financial Conduct Authority (the “FCA”).
Details of the Restructuring Plans, including the convening hearing and
creditor meetings, and details of the shareholder meeting of Petrofac, and
any further announcements required under applicable law or regulation,
will be published in due course.
The issue of the new ordinary shares and the New Notes is expected to
occur on or around the Restructuring Effective Date.
Implementation of the Restructuring is also subject to the satisfaction of
certain conditions precedent, including (among others):
• the resolutions to be proposed to shareholders at the General Meeting
for the purposes of implementing the Restructuring having been passed
by the requisite majorities;
• the Restructuring Plans having been sanctioned by the Court and a copy
of the sanction orders having been published in the London Gazette;
• the Restructuring documentation summarised in Section 2 having become
unconditional in all respects;
• the settlement agreement with HMRC in relation to the historical
claims described in Section 2(e) above having been entered into and
remaining in full force and effect;
• the supplemental agreements entered into between the Group and each of
ADNOC and TenneT remaining in effect and having not been terminated;
• securing a performance guarantee for a key EPC project or agreeing to
an alternative solution with the client;
• obtaining sufficient Bank Lender and non-compromised Thai Oil
guarantor support for the Restructuring;
• the FCA and the London Stock Exchange having approved the applications
for the new ordinary shares to be issued in connection with the
Restructuring to the equity shares (commercial companies) segment of
the Official List and to trading on the London Stock Exchange’s main
market for listed securities, respectively; and
• obtaining the consent of the Jersey Financial Services Commission to
the issue of any securities by a Jersey company (other than the new
ordinary shares) as part of the Restructuring.
b. Trading update
Financial performance for 2024 is expected to reflect similar levels of
operating activity compared to 2023, with the ramp up of the new E&C
contract portfolio replacing legacy contracts and a robust business in
Asset Solutions.
E&C is expected benefit from a reduced impact from legacy contracts, as
they reach the latter stages of completion, and with the initial margin
recognition on new contracts partially reducing the adverse operating
leverage. ETP has contributed to an increasing proportion of E&C
performance. In Asset Solutions, the Group expects to achieve low-single
digit margin improvement in H2 2024.
Free cash flow in the second half of the year is expected to be broadly
neutral, as the Group has continued to manage its payment obligations in
line with its operational collections pending the financial restructuring.
As a result, net debt is expected to be broadly in line with the first
half of the year, before adjusting for accrued and unpaid interest costs.
Readily available liquidity is also expected to be broadly in line with
the Group’s half-year position.
c. Further detail on the Financial Outlook
In addition to the outlook provided in Section 3 “Financial Outlook”,
additional outlook on the Group’s targeted financial performance is
summarised below:
• In addition to the ambitions described in Section 3 “Financial
Outlook”, central overhead cash outflows are expected to be between
US$40m-US$50m annually during the period, excluding interest costs on
the New Debt.
• Depreciation and amortisation in the E&C operating division is
expected to approximately double during the period from 2024 levels
(based on annualised H1 2024), predominantly as a result of the
expected increases in activity levels at project sites for new
contracts. In the Asset Solutions operating division, it is expected
to be lower than 2024 (based on annualised H1 2024) levels over the
period.
• Capital expenditure in the E&C operating division is expected to be
less than 1% of revenue during the period. Asset Solutions, as a
traditional asset light business, will have minimal capital
expenditure during the period.
• Levered cash flows in the operating divisions are expected to be as
follows:
◦ E&C: in the early part of the period, cash flows are expected to
be negative, as working capital normalisation for the E&C
operating division is expected to be US$250m-US$300m during 2025,
funded through increased liquidity from the Restructuring
proceeds and ongoing operational cash collections from existing
and new projects. During the period, total cash flows are
expected to be approximately low single digit multiples of the
EBITDA generation of the operating division as a result of the
accelerated collection profiles of new contracts, with the
exception of 2026 and 2027 where a low-to-mid-single digit
multiple is expected.
◦ Asset Solutions: cash flows are initially expected to be a
mid-to-low teens percentage of the EBITDA generation of the
operating division (before working capital normalisation from
Restructuring proceeds of US$50m), rising to approximately 50%
during the period.
◦ IES: cash flows are expected to be at a low single digit
percentage of Group revenue during the remaining life of the
asset.
• Cash outflows in relation to tax payments in E&C are expected to be
US$20m-US$40m annually during the period. In Asset Solutions, cash
outflows in relation to tax payments are expected to be US$20m-US$25m
annually during the period.
• In the period to 2026, remaining net cash collections from
substantially complete legacy projects are expected to be in the range
of US$50m-US$100m annually.
d. Risks to implementation of the Restructuring and Financial Outlook
• Risks to implementation of the Restructuring
There is no guarantee that the Restructuring will be implemented on the
anticipated timeframe or at all.
◦ It is the Directors’ view that the Company’s ability to continue as a
going concern is contingent on the implementation of the
Restructuring. If the Restructuring is not implemented, the Directors
expect that the Lock-Up Agreement will be terminated and, as a result,
the waivers and forbearance from the Funded Creditors would cease,
following which the Company would likely enter into administration or
liquidation proceedings.
◦ The components of the Restructuring are inter-conditional, and as a
result the implementation of the Restructuring depends, among other
things, on the passing of the resolutions proposed at the General
Meeting and the court sanctioning the Restructuring Plans. Risks to
sanctioning of the Restructuring Plans include not garnering the
requisite support from creditors or failing to achieve approval by the
court at the sanction hearing. The court has a wide discretion whether
to sanction a restructuring plan and will take into account a number
of factors, including the level of creditor support, the fairness of
the plan and any challenges raised by stakeholders.
◦ The terms of certain components of the Restructuring are still subject
to agreement. These include arranging performance guarantees for
certain key contracts (or agreeing to alternative solutions); full and
final settlement with HMRC; obtaining non-compromised Thai Oil
guarantor support for the Restructuring; and agreement with guarantee
providers to waive defaults resulting from the Restructuring. If the
Group cannot agree resolutions on these matters, which are conditions
to effectiveness of the Restructuring, the Restructuring will not be
implemented.
◦ The implementation of the Restructuring also relies upon the Group’s
ability to maintain sufficient liquidity prior to the implementation
of the Restructuring, including maintaining the support of trade and
other creditors without acceleration of their debt or enforcement of
their security rights.
• Risks to the Financial Outlook
The Group’s strategic and financial ambitions following implementation of
the Restructuring, as summarised in Section 3 “Financial Outlook” and
Section 5(b), are subject to a number of assumptions regarding its
operational and financial performance, certain of which are outside of the
Group’s control. As a result, there are significant risks to the Group’s
ability to achieve these ambitions, including (but not limited to) the
matters set out below and under the heading “Cautionary statement
regarding forward-looking statements”.
◦ The Group’s operating environment may become increasingly challenging,
beyond the Group’s current expectations. In the coming months and
following completion of the Restructuring, the Group may continue to
face risks to its liquidity, including for reasons beyond the Group’s
control, which may result in failure to achieve the operational and
financial performance targeted by the Group.
◦ An inability to secure guarantees in the future may have a material
adverse impact on the Group. If the Group is unable to secure new
guarantees (which are expected to be required gradually from H2 2025)
as anticipated, or to agree alterative arrangements with its clients,
this could limit its ability to take on new E&C contracts or require
material collateral postings, either of which would negatively affect
the Group’s liquidity.
◦ The Group’s success in achieving its financial ambitions will depend
on its ability to win new contracts and renewals and extensions of
existing contracts, in particular given the material concentration
among the Group’s clients. Client expenditure and bidding
opportunities will be dependent on their strategy and outlook, as well
as macroeconomic conditions (including commodity prices), all of which
are outside the Group’s control. New order intake represents a
significant proportion of targeted revenue in the coming years, and
the Group may not achieve its anticipated win rates.
◦ Failure to successfully execute contracts, including as a result of
delays or cost overruns, may result in substantial penalties or
losses. One of the Group’s contracts is currently suspended. Although
the Group expects operations on this project to re-commence following
implementation of the Restructuring, there can be no assurance this
will occur on the timing expected, that re-start costs will not be
material, or that the Group will not incur any related liabilities.
◦ The Group has a number of material outstanding disputes. Material
deviations from projected contract settlements and AVO expectations
could negatively affect the Group’s financial performance or liquidity
or its ability to meet its financial ambitions.
◦ The Group has not released audited consolidated financial statements
since May 2024 (as at and for the year ended 31 December 2023), and
the Group’s independent auditor did not express an opinion on these
financial statements, as described therein. The Group’s 30 June 2024
interim consolidated financial statements were not audited and or
subject to independent auditor review.
◦ The Group’s relationships with its clients, suppliers and
sub-contractors have at times been materially strained and its
liquidity position in recent years has required renegotiation of
contractual terms. Although the Group will take steps, following
implementation of the Restructuring, to unwind these balances, it may
experience reputational damage as a result of historical liquidity
measures and steps taken to implement the Restructuring and it may
have limited ability to achieve similar arrangements in the future. If
the Group is unable to maintain positive and supportive relationships
with contractual counterparties, it could create risks to completion
of projects in a timely manner, at the cost levels anticipated or at
all.
e. Structure of the New Equity capital raise
The New Equity capital raise is being conducted by way of a
non-pre-emptive placing and, together with the issuance of ordinary shares
in the debt restructuring, it will result in material dilution for
existing Shareholders. In aggregate, 20,550m ordinary shares will be
issued, representing 97.5% of the Company.
The Board has carefully considered, including following consultation with
a number of the Company’s largest shareholders and creditors, whose
support and/or participation is critical for the completion of the
Restructuring, the best way to structure the proposed transactions. In
deciding to structure the New Equity capital raise by way of a
non-pre-emptive placing, the Board sought to balance the dilution to
shareholders with the benefits of announcing a fully committed
transaction, which the Board considered was vital to the stability of the
Company and the success of the wider Restructuring.
As referenced above, the Company values its retail investor base and is
keen to ensure that retail investors have an opportunity to participate in
the equity capital raise. The Company therefore intends to announce an
offer of new ordinary shares to retail investors to raise approximately
US$8m at the same issue price as the New Equity issued as part of the
Restructuring, following the publication of the Company’s audited
financial statements for the year ended 31 December 2024. The Company also
intends to give preferential allocation to those retail investors who are
shareholders on the date of this announcement to the extent reasonably
practicable.
f. Restructuring alternative
The Company has worked with its advisors and experts over the past 12
months to identify the likely alternative to a restructuring and the
impact of such an alternative on shareholders and creditors. In this
regard, the Company believes the likely alternative to the restructuring
is a Group-wide insolvency, in which there would be no recoveries for
shareholders and creditor recoveries would be uncertain. Work remains
ongoing in this regard, is not finalised and is subject to change. Further
detail will be provided as part of the Restructuring Plans process.
However, at present the Company expects the outcome for its secured
creditors in respect of outcomes across the Group to be in the range of 10
pence to 45 pence in the pound.
g. Related-party New Equity subscription
In connection with the New Equity, (i) Ayman Asfari (in his own capacity),
(ii) HARK PTC Limited (as trustees of the Lam Trust) and (iii) HARK PTC
Limited (as trustees of the Lamia Trust) (together, the “Related Parties”)
have agreed to subscribe for new ordinary shares representing 2.85% of the
post-Restructuring share capital of the Company, together with warrants as
described above, for consideration of US$10m (the “Related Party
Subscription”). Ayman Asfari, is a related party of the Company under UK
Listing Rule 8.1.11R(4) and the subscription by the Related Parties
constitutes a related party transaction under UK Listing Rule 8.2.1R.
Pursuant to UK Listing Rule 8.2.2R, the Board of the Company confirms its
view that the Related Party Subscription is fair and reasonable as far as
the shareholders of the Company are concerned and that the Board has been
so advised by J.P. Morgan Securities plc (which conducts its UK investment
banking business as J.P. Morgan Cazenove), as sponsor to the Company.
Each Director is a related party of the Company for the purposes of the UK
Listing Rules. In connection with the New Equity, René Médori (Chairman),
Tareq Kawash (Chief Executive Officer), Afonso Reis e Sousa (Chief
Financial Officer) and David Davies (Non-Executive Director) have agreed
to subscribe for new ordinary shares representing in aggregate 0.31% of
the post-Restructuring share capital of the Company, for consideration of
US$1.08m (the “Director Subscriptions”). The Director Subscriptions fall
within the scope of the UK Listing Rules, however, due to the size of each
individual subscription relative to the Company’s market capitalisation,
the Director Subscriptions are exempt from the rules regarding related
party transactions under UK Listing Rule 8.
5. Participation by Funded Creditors in the Lock-Up Agreement and the New
Money
All Funded Creditors will be invited to accede to the Lock-Up Agreement,
by signing an accession agreement substantially in the form set out in
Schedule 4 of the Lock-Up Agreement, and to the Backstop Agreement by 10
January 2025.
Each Funded Creditor that accedes to the Lock-Up Agreement by 10 January
2025 (or acquires funded debt that was locked up as of 10 January 2025)
will be entitled to an early bird fee constituting 0.25% of its funded
debt that was locked up as of 10 January 2025. The early bird fee will be
payable in cash at completion of the Restructuring.
All Funded Creditors are also invited to accede to the Backstop Agreement
and provide backstop commitments up to their pro rata share calculated by
reference to the Funded Debt held by such Funded Creditors by signing an
accession agreement substantially in the form set out in Schedule 2 of the
Backstop Agreement by 10 January 2025.
Each Funded Creditor that accedes to Backstop Agreement by 10 January 2024
will receive a backstop fee of 3.75% on the amount of debt funding and
equity funding backstopped by such Funded Creditors and the Initial
Backstop Providers, satisfied by the issuance of new ordinary shares and
the issuance of additional New Money Notes on the Restructuring Effective
Date.
In addition, all Funded Creditors will also be invited to participate in
the New Money opportunity, pro rata to their Funded Debt (with the
corresponding scale back of the original backstop commitments).
Funded Creditors who wish to participate are advised that, pursuant to the
terms of the Lock-Up Agreement, eligibility for participation is
contingent on subscription for both New Equity and the New Notes in the
Funding Ratio.
Details of the terms on which Funded Creditors will be invited to
participate are set out in Sections 2(a), (b) and (c) of this
announcement.
The Company has engaged Kroll Issuer Services Limited to act as lock-up
agent for the Lock-Up Agreement (the “Lock-Up Agent”). Questions about how
to accede to the Lock-Up Agreement and the Backstop Agreement and
participate in the New Money should be directed to the Lock-Up Agent at
the contact details provided below.
All documentation relating to the Lock-Up Agreement and the Backstop
Agreement, together with any updates, will be available on the dedicated
website: https://deals.is.kroll.com/Petrofac.
For additional information and questions about the Restructuring, holders
of the Group’s senior secured notes are encouraged to contact the Ad Hoc
Group via its financial advisor, Houlihan Lokey UK Limited
( 2 projectplutohl@hl.com).
* * * * * *
The information contained within this announcement is deemed by the
Company to constitute inside information as stipulated under Regulation
(EU) No. 596/2014 on market abuse (which forms part of UK domestic law
pursuant to the European Union (Withdrawal) Act 2018) and was authorised
for release by Scott Brooker, Company Secretary.
For further investor relation queries, please email:
financialrestructure@petrofac.com
Contact details of the Lock-Up Agent and the Company’s financial advisors
are as follows:
Lock-Up Agent
Kroll Issuer Services Limited
The Shard
32 London Bridge Street
London SE1 9SG
Email: petrofac@is.kroll.com
Website: https://deals.is.kroll.com/petrofac
Attention: Petrofac team
Company financial advisor
Moelis & Company
Telephone: +44 207 634 3660
Email: 3 project_peru_wt_ext@moelis.com
Attention: Rohan Choudhary
IMPORTANT NOTICES
This announcement has been issued by and is the sole responsibility of the
Company. The information contained in this announcement is for background
purposes only and does not purport to be full or complete. No reliance may
or should be placed by any person for any purpose whatsoever on the
information contained in this announcement or on its accuracy or
completeness. The information in this announcement is subject to change.
A copy of the Prospectus and Circular, once published, will be available
on the Company's website at 4 https://www.petrofac.com. Neither the
content of the Company's website nor any website accessible by hyperlinks
on the Company's website is incorporated in, or forms part of, this
announcement. The Prospectus and Circular will provide further details of
the Restructuring, including securities being issued pursuant to it.
This announcement does not contain or constitute an offer for sale or the
solicitation of an offer to purchase securities in the United States. No
securities referred to herein have been or will be registered under the US
Securities Act of 1933 (the "Securities Act") or under any securities laws
of any state or other jurisdiction of the United States and such
securities may not be offered, sold, taken up, exercised, resold,
renounced, transferred or delivered, directly or indirectly, within the
United States except pursuant to an applicable exemption from or in a
transaction not subject to the registration requirements of the Securities
Act and in compliance with any applicable securities laws of any state or
other jurisdiction of the United States. No public offering of securities
is being made in the United States. No securities referred to herein, nor
this announcement nor any other document connected with the proposed
transactions referred to herein has been or will be approved or
disapproved by the United States Securities and Exchange Commission or by
the securities commissions of any state or other jurisdiction of the
United States or any other regulatory authority, and none of the foregoing
authorities or any securities commission has passed upon or endorsed the
merits of the proposed transactions or the securities referred to herein
or the adequacy of this announcement or any other document connected with
the proposed transactions referred to herein. Any representation to the
contrary is a criminal offence in the United States.
This announcement is for information purposes only and is not intended to
and does not constitute or form part of any offer or invitation to
purchase or subscribe for, or any solicitation to purchase or subscribe
for any securities in any jurisdiction. No offer or invitation to purchase
or subscribe for, or any solicitation to purchase or subscribe for, any
securities will be made in any jurisdiction in which such an offer or
solicitation is unlawful. The information contained in this announcement
is not for release, publication or distribution to persons in the United
States or Australia, Canada, Japan, the People's Republic of China or
South Africa, and should not be distributed, forwarded to or transmitted
in or into any jurisdiction, where to do so might constitute a violation
of local securities laws or regulations.
No representations or warranties, express or implied, are made as to, and
no reliance should be placed on, the accuracy, fairness or completeness of
the information presented or contained in this release.
This release is for informational purposes only and does not constitute or
form part of any invitation or inducement to engage in investment
activity, nor does it constitute an offer or invitation to buy any
securities, in any jurisdiction including the United States, or a
recommendation in respect of buying, holding or selling any securities.
This announcement is an advertisement for the purposes of the Prospectus
Regulation Rules of the FCA and not a prospectus and not an offer to sell,
or a solicitation of an offer to subscribe for or to acquire securities.
Neither this announcement nor anything contained herein shall form the
basis of, or be relied upon in connection with, any offer or commitment
whatsoever in any jurisdiction. This announcement is not a "prospectus"
for the purposes of the Companies (Jersey) Law 1991.
J.P. Morgan Securities plc, which conducts its UK investment banking
business as J.P. Morgan Cazenove (“J.P. Morgan”), is authorised in the
United Kingdom by the Prudential Regulation Authority (the “PRA”) and
regulated in the United Kingdom by the FCA and PRA. J.P. Morgan is acting
exclusively as the sole sponsor to the Company and no one else in
connection with the matters referred to in this announcement and will not
be responsible to anyone other than the Company for providing the
protections afforded to clients of J.P. Morgan nor for providing advice in
relation to the matters referred to in this announcement. Neither J.P.
Morgan nor any of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of J.P. Morgan in connection with this announcement, any statement
contained herein or otherwise.
Moelis & Company UK LLP ("Moelis & Company"), which is authorised and
regulated by the FCA in the UK, is acting as exclusive financial adviser
to the Company and no one else in connection with the matters described in
this announcement and will not be responsible to anyone other than the
Company for providing the protections afforded to clients of Moelis &
Company nor for providing advice in connection with the matters referred
to herein. Neither Moelis & Company nor any of its affiliates owes or
accepts any duty, liability or responsibility whatsoever (whether direct
or indirect, whether in contract, in tort, under statute or otherwise) to
any person who is not a client of Moelis & Company in connection with this
announcement, any statement contained herein or otherwise.
Cautionary statement regarding forward-looking statements
This document and the information incorporated by reference into this
document include guidance regarding the Group’s anticipated future
performance. Such statements (including estimates and projections prepared
by Petrofac's management with respect to its anticipated future
performance) are, or may be deemed to be, “forward-looking statements”.
These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms “believes”, “estimates”,
“anticipates”, “expects”, “intends”, “plans”, “projects”, “continue”,
“goal”, “target”, “aim”, “may”, “will”, “would”, “could” or “should” or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout this
document and include statements regarding the intentions, beliefs or
current expectations of the Directors, the Company or the Group
concerning, among other things, the operating activities, results,
financial condition, prospects, growth, strategies and dividend policy of
the Group and the sectors and markets in which it operates.
Such forward-looking statements involve elements of subjective judgement
and analysis and reflect various assumptions made by the management
concerning anticipated results (including the successful completion of the
Restructuring, implementation of the Group’s strategy commercial
discussions (including variation orders and settlements) and development
of the Group’s operating environment), which may or may not prove to be
correct. By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on circumstances
that may or may not occur in the future and may be beyond the Directors’
or the Company’s ability to control or predict. Forward-looking statements
are not guarantees of future performance. The Group’s actual operating
activities, results, financial condition, dividend policy and the
development of the sectors and markets in which it operates may differ
materially from the impression created by the outlook and other
forward-looking statements contained in this document and/or the
information incorporated by reference into this document.
The outlook and other forward-looking information included in this
document is illustrative and unaudited information. It has been prepared
for internal scenario planning purposes and is based on a number of
assumptions, many of which are outside of management control and have high
levels of uncertainty attaching to them. The forward-looking financial
information of the Group has been prepared by, and is responsibility of,
management, and the Group’s current independent auditors have not audited,
reviewed, compiled, examined nor applied agreed-upon procedures with
respect to such information. Such information is being included for
information only and is not to be relied on as any indication of the
future performance of Petrofac.
In addition, even if the operating activities, results, financial
condition and dividend policy of the Group, and the development of the
sectors and markets in which it operates, are consistent with the outlook
and other forward-looking statements contained in this document, those
results or developments may not be indicative of results or the
development of such sectors and markets in subsequent periods.
Important factors that could cause these differences between the outlook
set out herein and the Group’s actual operational and financial
performance include, but are not limited to, failure to implement the
Restructuring on the targeted timeframe (or at all); risks and
uncertainties relating to Petrofac’s business (including order intake,
bidding success and client retention), successful completion of contracted
work and backlog delivery (in particular legacy backlog and paused
projects), variation orders and client settlements, maintenance of
supplier relationships and the ability to source new suppliers, ability to
implement strategic bidding objectives and achieve targeted organisational
efficiencies, and receipts of payments from third parties); general
political, economic and business conditions; banking and surety market
appetite to provide performance bonds and/or payment guarantees (in
particular on targeted new contracts, on anticipated timing in H2 2025);
the timing of receipts of payments from third parties; sector and market
trends; changes in government; changes in law or regulation; stakeholder
perception of the Group and/or the sectors or markets in which it
operates; unforeseeable circumstances over the period; errors and
uncertainties in the Group’s systems utilised in preparing the outlook;
and the risks described in the Group’s Annual Report for 2023. The Group’s
ability to achieve the outlook set out herein is substantially dependent
on its ability to achieve its strategic operational goals, objectives and
targets over applicable periods. Financial restrictions arising as a
result of the Restructuring, including cash-flow restrictions imposed by
certain key client contracts and restrictive financing covenants, may
limit the Group’s ability to achieve these strategic objectives. In
addition, Petrofac’s financial condition and results of operations may be
materially affected by factors largely or entirely outside of the control
of management, including whether shareholders pass the resolutions
required to implement the Restructuring and the Restructuring Plans are
sanctioned by the court. This information also reflects assumptions as to
certain business decisions of the Group that have been and will be subject
to change.
The Directors are of the opinion that, if the steps comprising the Balance
Sheet Restructuring are implemented, this will significantly deleverage
the Group’s balance sheet, alleviate pressure on the Group’s liquidity and
deliver a sustainable capital structure to support its ability to achieve
its financial ambitions in the coming years. However, the Directors have
reached this view based on a number of assumptions regarding the Group’s
operational and financial performance in the coming years, certain
elements of which are beyond the Group’s control or otherwise subject to
material risks. These assumptions include the following: access to
Guarantees for E&C contracts from June 2025, on expected commercial terms
consistent with those historically procured by the Group; successful legal
and operational separation of the Group’s delivery units; delivery of the
Group’s E&C contracts in line with client agreed milestones and forecast
margins, without liquidated damages arising on any contract and including
the timely and full releases of applicable retentions; the Group’s E&C and
Asset Solutions operating segments being awarded future contracts,
including renewals and new awards from existing clients, in line with its
outlook and strategy, and the IES operating segment production and oil
price assumptions; timely normalisation of the Group’s working capital
position, particularly creditor payments and the settlement of overdue
creditors, and (if required in the future) successful negotiation of
amendments to applicable payment terms;.collection of a number of material
forecast one-off receipts from clients in line with management’s expected
timing and quantum, including assessed variation orders and other
settlements, certain of which are the subject of arbitration; no
requirement for ringfenced payments for contracts other than those already
committed at the date of this announcement; no significant settlements are
required with respect to litigations, disputes and claims; and no
significant unforeseen income taxes become payable under the new federal
Corporate Income Tax Regime in the UAE (effective from 2024).
No statement in this announcement is intended as a profit forecast, and no
statement in this announcement should be interpreted to mean that
underlying operating profit for the current or future financial years
would necessarily be above a minimum level, or match or exceed the
historical published operating profit or set a minimum level of operating
profit.
Neither the Company nor any of its advisers is under any obligation to
update or revise publicly any forward-looking statement contained within
this announcement, whether as a result of new information, future events
or otherwise, other than in accordance with their legal or regulatory
obligations (including, for the avoidance of doubt, the Prospectus
Regulation Rules, the Listing Rules and Disclosure Guidance and
Transparency Rules).
══════════════════════════════════════════════════════════════════════════
5 1 Note: Figures set out above and elsewhere in this announcement do
not reflect the dilutive effect of the following share issuances related
to the Restructuring and referenced in this announcement, certain of which
may occur as early as the Restructuring Effective Date: (i) any ordinary
shares issued in connection with the compromise of historical claims and
contingent liabilities; (ii) the potential New Equity commitment upsize of
up to US$25m; (iii) the intention to undertake a retail share offer of
approximately US$8m (including any shareholder decision not to
participate); (iv) any ordinary shares issued in connection with the new
management incentivisation programme following completion of the
Restructuring; (v) any shares issued in connection with non-compromised
Thai Oil guarantor claims and (vi) any ordinary shares issued following
any exercise of warrants issued as part of the Restructuring.
══════════════════════════════════════════════════════════════════════════
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
══════════════════════════════════════════════════════════════════════════
ISIN: GB00B0H2K534
Category Code: MSCU
TIDM: PFC
LEI Code: 2138004624W8CKCSJ177
OAM Categories: 2.2. Inside information
3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 366622
EQS News ID: 2056253
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
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