High Court sanctions Waldorf’s (second) highly contested restructuring plan

Summary

On 5 May 2026, Mr Justice Michael Green sanctioned the restructuring plan proposed by UK oil and gas company Waldorf Production UK Plc under Part 26A of the Companies Act 2006, exercising the cross-class cram-down power to cram HMRC liabilities. The judgment rejects HMRC's argument that its constitutional mandate created a jurisdictional bar to cram down under s.901G; applies the no worse off test (or “Condition A”), finding that HMRC would in fact likely be better off under the plan than in the relevant alternative; and applies the Court of Appeal's reasoning in Petrofac, confining the no worse analysis to a comparison between the creditor's existing rights against the company being compromised by the plan and the rights under the relevant alternative.

Background

This wasn’t Waldorf’s first attempt at a plan. The company’s first plan (“RP1”) was proposed after the group suffered financial difficulties following the introduction of the UK Energy Profits Levy (“EPL”). In August 2025 RP1 was refused sanction by Hildyard J on the basis that, following the Court of Appeal judgments in Thames and Petrofac: (a) there had been inadequate engagement with unsecured creditors; and (b) RP1 did not provide those creditors with a fair share of the restructuring benefits (see our previous blog here). 

After the failure of RP1, a wholly-owned subsidiary of Harbour Energy plc agreed to purchase most of the Waldorf Group for US$205 million less costs, with US$85 million allocated to the plan company, conditional on the group's EPL liabilities being extinguished, as well as other unsecured liabilities to an M&A creditor. In that context, Waldorf formulated and negotiated a new plan, including a two-day mediation attended by all plan creditors other than HMRC (who chose not to participate). The second plan (“RP2”) was launched in December 2025.

There were four creditor classes and three approved the plan with overwhelming majorities or unanimously. HMRC was in a class of its own and voted against the plan, mounting a full challenge, using jurisdictional as well as fairness arguments as summarised below. 

The jurisdictional argument: no bar to cramming down HMRC under Part 26A

HMRC argued that its constitutional status meant the court could not override its rational decision to reject the proposed compromise. 

The court rejected the argument in unequivocal terms. Michael Green J held that he was “in little doubt that there is no jurisdictional bar to the court exercising its cross class cram down power against HMRC, even where HMRC has rationally decided to oppose a plan”. 

The reasoning drew on multiple supporting threads: there is no legislative carve-out for HMRC under Part 26A; HMRC has been crammed down in previous Part 26A cases (including Re Houst Limited (see our blog here) and Re Prezzo Investco Limited (see our blog here)  without raising this objection; and HMRC accepted it can be outvoted in a CVA or IVA without the debtor having to show that HMRC's decision was irrational. The judge also accepted the company’s contention that giving HMRC an effective veto over restructuring plans compromising tax liabilities would undermine the rescue culture embodied by Part 26A.  However, the court did recognise that HMRC is an involuntary creditor and reaffirmed earlier judicial statements in Nasmyth that “it is important that the Court should scrutinise the Plan with care and should not cram down the HMRC unless there are good reasons to do so” lest it would give companies a green light to use Part 26A to cram down their unpaid tax bills. 

The no worse off test under s.901G: tax losses fall outside the scope of Condition A

HMRC contended that the “no worse off” comparison required by Condition A in cross-class cram-down should encompass not merely the EPL Liabilities being compromised under RP2, but the wider net effect on the Exchequer of Harbour Energy's anticipated use of the Waldorf group's  accumulated tax losses (which would continue to be available for utilisation by the group post-acquisition and sanction of the plan) to shelter its future profits. The court disagreed, applying Petrofac, that the test "must be confined to the creditor's existing rights as a creditor that are being compromised by the plan". Thus the loss of revenue from reduced tax on the purchaser were beyond the scope of the test. 

In any event, after a detailed examination of the evidence as to the availability of the tax losses to shelter profits, it was held unlikely that HMRC would in fact be worse off under RP2 than in the relevant alternative.

Fairness: tax losses can be a restructuring benefit 

HMRC argued that tax losses were a benefit preserved by the restructuring and that it should therefore be compensated for their contribution. The company sought to argue that tax losses were wholly irrelevant as it was simply an operation of tax law that profits could be set off against losses. The Court was sympathetic to HMRC’s broad argument that the availability of valuable tax losses could be taken into account in considering the fairness of the plan, particularly given how important the preservation of tax losses was to the deal in this case. 

However, as noted above, the judge found that HMRC's evidence as to the possible utilisation  of those losses did not fully hold up to scrutiny. Accordingly, and weighing other factors, the judge found that the plan was fair. The mediation process, the position of the other unsecured creditor and the previous sales process run by the administrators of the parent companies clearly played a part  in the judge's reasoning. 

The Court did say though that even if it had found that HMRC would be left worse off under the plan by the utilisation of the tax losses, it would still have been a difficult question as to how that should be reflected in the plan, given that there is no connection between the compromise of the EPL Liabilities by the plan and any net loss suffered by HMRC as a result of the relief gained by Harbour from the acquired tax losses.

Other grounds: no abuse of process and impact of the company’s past conduct

HMRC argued that the plan was, in targeting squarely the EPL Liabilities, an abuse of Part 26A. The judge described the basis of this ground as "difficult to discern". It was again rejected, with the judge noting that HMRC had various tools available to it to deal with tax avoidance.

HMRC also contended that a dividend paid by the company after the introduction of the EPL and its failure to make EPL payments while continuing to pay interest on its bonds was a root cause of the company's inability to meet its liabilities. The court was sympathetic here (as it had been in RP1). However, the judge found that the company had taken the criticism levied by the court in RP1 on board and that the dividend was adequately addressed by the assignment of any claims in respect of the dividend to the administrators of the parent companies. The court rejected the notion that continuing to trade while not paying the EPL liabilities rendered the plan unfair.

Use of mediation

HMRC refused to attend a two-day mediation to which all creditors were invited, citing its internal processes and a concern about setting precedent. The court found those reasons unconvincing: "as it was HMRC's complaint in relation to RP1 that the Plan Company had not engaged with the unsecured creditors, it was unhelpful for it then to refuse to attend a mediation in relation to the Plan". The court stressed that mediation in particular in circumstances where a first attempt at a restructuring had failed to find agreement among the stakeholders is to be encouraged. 

Key takeaways 

1. No jurisdictional bar to cramming HMRC liabilities. HMRC's constitutional mandate does not create a jurisdictional bar to cross-class cram down under s.901G; its rational objections carry weight on discretion but do not bind the court.
2. Confirming Petrofac, the no worse off test under s.901G remains tightly drawn and limited to rights as a creditor under the plan. The comparison is limited to the creditor's existing rights being compromised (Petrofac applied); wider consequential effects (here: consequences on the Exchequer, including the utilisation of tax losses) fall outside the statutory condition.
3. Tax losses may nonetheless be relevant for the court’s discretion. Again, applying Petrofac, the mere fact that the no worse off test is tightly limited does not mean that the assessment of what is a benefit of the restructuring is delineated in the same way and indeed there is more scope here for indirect benefits to be relevant. The court treated the preservation and use of tax losses as a restructuring benefit within the Thames Water formulation.
4. Creditor engagement cuts both ways. A dissenting creditor which refuses to attend a mediation and then complains of inadequate engagement risks having that criticism turned against it.

Next steps

The parallel restructuring plan for WCNS(I) in Scotland was sanctioned on 5 May 2026 after HMRC abandoned its opposition in light of the High Court sanction. It remains to be seen whether HMRC will seek leave to appeal.  The bonds under the plan were governed by Norwegian law and the court accepted the evidence that they will be released under Norwegian law once the plan is sanctioned. 

The full High Court judgment is available here: Re Waldorf Production UK Plc EWHC 1014 (Ch). The Scottish reasoned judgment is waited.