The High Court’s sanction of Waldorf Production UK Plc’s second restructuring plan, Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch), is a useful decision for companies, creditors and restructuring professionals considering a restructuring plan under Part 26A of the Companies Act 2006.
Waldorf is a good case study on what the Part 26A regime now demands of a plan company seeking to invoke the cross-class cram-down power in the wake of the Court of Appeal’s trilogy of decisions in Adler [2024] EWCA Civ 24, Thames Water [2025] EWCA Civ 475 and, most significantly, Petrofac [2025] EWCA Civ 821. These cases collectively raised the bar for obtaining sanction of a contested restructuring plan, demanding genuine engagement with all stakeholder classes, cogent evidence on the allocation of restructuring value, and a credible fairness case that goes beyond the bare jurisdictional minimum. Waldorf’s first plan failed that standard. Its second plan met it and succeeded.
From Virgin Active to Petrofac: The End of the Straightforward Out-of-the-Money Cram-Down
The Virgin Active restructuring plan set the standard for the cross-class cram-down soon after the Part 26A regime came into force in 2020, the first contested cross-class cram-down case of any significance. In this restructuring plan Snowden J concluded that the court’s discretion at sanction should be guided primarily by the views of those creditors holding a genuine economic interest in the company (that is, those who stand to recover something meaningful in the relevant alternative), and that creditors who would receive nothing in the relevant alternative had limited scope to resist a plan on fairness grounds. The practical consequence was significant: it became accepted market practice for restructuring plans to only provide for a de minimis payment to out-of-the-money creditors (one which merely “beat” their recovery in the relevant alternative).
This meant that engagement with out-of-the-money creditors became, at best, a courtesy. Green J confirmed this in Waldorf, noting that in formulating its first plan the plan company had proceeded by “adopting the then prevailing view that little or no weight needed to be applied to the views of such ‘out of the money’ creditors.” That assumption was the first plan’s undoing as the Court of Appeal’s trilogy of decisions had changed this approach.
In Petrofac, the Court of Appeal overturned the sanction of twin restructuring plans proposed by the Petrofac group, notwithstanding that the High Court had found the jurisdictional conditions for cram-down to be satisfied. The plans had been structured to allocate the bulk of post-restructuring equity to the group’s secured ad hoc creditor group (who also provided new money), while two dissenting unsecured creditors, Saipem and Samsung, whose claims arose from a failed joint venture, were to receive only a nominal cash fund and equity warrants of limited value. The Court of Appeal held that the cram-down power is not a tool for assenting classes to appropriate an inequitable share of restructuring benefits and set aside the plans on the ground that the first instance judge had accepted, without sufficient scrutiny, the companies’ evidence on why distributing almost all restructuring value to the new money providers was fair. Petrofac had not justified the return allocated to new money providers as either a market cost of funding or a fair allocation of restructuring benefits.
“The proper use of the cross-class cram down power is to enable a plan to be sanctioned against the opposition of those unreasonably holding out for a better deal, where there has been a genuine attempt to formulate and negotiate a reasonable compromise between all stakeholders.” — Court of Appeal in Petrofac [2025] EWCA Civ 821, [191]
The 2025 Practice Statement (published 18 September 2025, effective for convening hearings listed from 1 January 2026) also reinforces this shift in approach. It provides that where cross-class cram-down is anticipated, the applicant’s convening evidence should now explain the extent of engagement with creditors and members, any differences in engagement or information provision, and any objections or alternative proposals. The failure of engagement that characterised Waldorf’s first plan would, in a case brought today, be capable of being identified and substantively challenged earlier in the process at the convening hearing.
Why Waldorf’s First Plan Failed
Waldorf Production UK Plc’s financial difficulties were driven by substantial unpaid Energy Profits Levy (“EPL”) liabilities of approximately US$94 million due to HMRC, arising from the financial years ended 31 December 2022, 2023 and 2024, and a claim of US$29.5 million arising from an M&A transaction with Capricorn Energy plc (the “M&A Creditor”). Both were unsecured creditors. The plan company’s difficulties had also been compounded by the payment of a US$76 million dividend in October 2022, off the back of management accounts which had not reflected the EPL liability, about which both Hildyard J and Green J expressed concern.
The first restructuring plan (“RP1”) was proposed in February 2025. The plan company negotiated its terms with its secured bondholders through a steering committee but, as Green J noted in the second restructuring plan (“RP2”) judgment, RP1 adopted “the then prevailing view that little or no weight needed to be applied to the views of such ‘out of the money’ creditors.” There was no meaningful engagement with either HMRC or the M&A Creditor. RP1 offered them a cash payment of 5% of their respective liabilities, with contingent upside sharing that was considered very unlikely to produce anything.
RP1 was a classic example of the pre-Petrofac approach. Hildyard J refused sanction of RP1 as he had not been satisfied that there had been “any adequate engagement with the unsecured creditors and that RP1 provided benefits to those creditors that were commensurate with what they might reasonably and fairly have negotiated for their support had they had the opportunity to do so.”
What Changed in the Second Restructuring Plan
Following the failure of RP1, Waldorf concluded a sales process resulting in an agreement to sell most of the group to Chrysaor Holdings Limited, a wholly-owned subsidiary of Harbour Energy plc, a FTSE 250 oil and gas company, for approximately US$205 million less leakage. The sale and purchase agreement was conditional upon the compromise of the plan company’s unsecured liabilities being agreed. RP2 was the means of securing that agreement.
After informing HMRC of the non-binding indicative offer in September 2025, Waldorf and its advisers sought to negotiate terms with all plan creditors, including through a two-day mediation on 16 and 17 October 2025, a unique approach for a restructuring plan of this kind. Although no agreement was reached at the mediation itself, negotiations continued. The M&A Creditor, which had actively opposed RP1, agreed to compromise its claim for 14% of its nominal value and entered a lock-up agreement in support of the sale by 11 December 2025. All other creditors except HMRC agreed terms.
HMRC declined to attend the two-day mediation, citing internal decision-making processes and concerns about setting a precedent for future mediations. Green J found those reasons “not particularly convincing” and the refusal “unhelpful”. HMRC’s principal complaint about RP1 had been the absence of meaningful engagement with its unsecured creditors, yet when offered precisely that opportunity through a structured mediation process, HMRC declined to attend.
Under RP2, HMRC was to receive approximately 14% of the nominal value of the EPL liabilities for 2022–2024. That compared with an estimated recovery of up to only 0.1% in the relevant alternative (being its share of the prescribed part). Three creditor classes approved the plan unanimously. HMRC, placed in its own class, voted against and actively opposed sanction.
RP2 succeeded, and it succeeded precisely because it satisfied the requirements that Petrofac now demands. The allocation of sale proceeds was supported by a concrete, independently negotiated transaction at a specific price, with comparative recovery evidence the court could evaluate. The plan company was not asking the court to sanction an opaque value allocation dependent on contested desktop valuations. Green J found that the M&A process had been “conducted in the real world” and that the Administrators’ endorsement of the Harbour offer was “a better guide to assessing the value of the deal... than the Investment Value found by [HMRC’s valuation expert]”.
HMRC’s Position: Public Function but No Veto
The constitutional argument: jurisdiction
HMRC ran, for the first time in such absolute terms, the argument that its constitutional function as tax collector meant that the court lacked jurisdiction to override its rational decision to reject the plan. Green J rejected this argument, Part 26A contains no carve-out for HMRC. A jurisdictional bar requiring HMRC’s consent would give it an effective veto, which could not have been the legislative intent behind Part 26A and would be inconsistent with the rescue culture embodied in current insolvency law.
That said, HMRC’s unique position is not irrelevant. Agreeing with Leech J in Re Nasmyth Group Limited [2023] EWHC 988 (Ch), Green J confirmed that “it is important that the Court should scrutinise the Plan with care and should not cram down HMRC unless there are good reasons to do so”. Its public function, involuntary creditor status and the circumstances in which tax liabilities arose all feed into the discretionary fairness analysis; they do not, however, go to jurisdiction.
HMRC’s Contingent Payment Proposal
HMRC’s primary remedy at the sanction hearing was not a straightforward refusal of sanction but rather the imposition of its “Contingent Payment Proposal” that it had put forward: a mechanism under which the EPL liabilities would remain outstanding and become payable as and when Harbour and the group realised the benefit of the acquired tax losses. Green J rejected this on two bases.
First, imposing such a condition would fundamentally alter the Plan as agreed between all other plan creditors: the M&A Creditor, which ranked equally with HMRC as an unsecured creditor, would have its debt extinguished while HMRC’s would not. Green J found it would be neither right nor fair for the court to interfere with the commercial compromise in that way. Second, Harbour had made clear through its solicitors that it would only proceed with the acquisition on the basis that the EPL liabilities were extinguished in full. Imposing the Contingent Payment Proposal would have risked killing the deal entirely.
This is an important practical lesson: the court’s jurisdiction to modify a plan on sanction has clear limits where the modification would materially alter a commercially negotiated deal supported by all other stakeholders.
The tax-loss argument
One of HMRC’s central arguments was that the transaction preserved substantial tax losses within the Waldorf group. HMRC’s position was that Harbour would be acquiring accumulated tax losses of US$4.5 billion which could potentially reduce its future tax liabilities by around US$924 million, more than four times the combined EPL liabilities of the Waldorf group. Harbour intended to use those losses to shelter future profits. HMRC argued that this made the Exchequer worse off overall even if the direct EPL liabilities comparison favoured the plan.
Green J addressed this in two stages. First, as a matter of law, the tax losses are not relevant to the s.901G(3) “no worse off” jurisdictional test. Applying the Court of Appeal’s analysis in Petrofac (which confined the test to the financial value of rights being compromised by the plan), wider fiscal consequences that are not themselves rights compromised or released by the plan fall outside the jurisdictional comparison.
Second, Green J found that HMRC and the Exchequer would actually be better off under the plan than in the relevant alternative, even accounting for the tax losses. The key finding was that HMRC’s case rested on 100% utilisation of both available tax loss “buckets” (accumulated losses and forecast decommissioning losses) which HMRC’s own expert witness accepted was unlikely to be achievable in practice. Once even a modest reduction in utilisation was factored in, the Exchequer came out better off under the plan. Green J found it was not a reasonable assumption that Harbour could achieve 100% utilisation of both buckets.
However, Green J did accept that the tax losses could in principle be taken into account when assessing the fairness of the plan at the discretionary stage. He declined to find that they were legally irrelevant to discretion, noting that the tax losses were intimately bound up with the deal and could not realistically be ignored. Had HMRC established that the Exchequer would be materially worse off overall, that would have been a live fairness issue. On the facts, however, it did not arise.
The point therefore remains open for future plans: where preservation of significant tax assets is part of the commercial rationale for a transaction, courts may treat the wider fiscal consequences as a relevant consideration in the discretionary fairness analysis, even though they fall outside the s.901G(3) jurisdictional test.
Past conduct
HMRC’s further objection was that the plan should not be sanctioned because of the plan company’s past conduct: a dividend of US$76 million that had been paid out in October 2022 without taking account of the EPL liability, the deliberate decision not to pay EPL while continuing to trade, and the incurring of over US$62 million in costs across RP1 and RP2. On the facts, Green J held that the plan company’s past conduct did not justify refusing sanction where the plan itself was fair and refusal would penalise creditors without producing any countervailing benefit. Claims arising from the October 2022 Dividend were assigned to the administrators for consideration. The point is a practical reminder that courts focus on the fairness of the plan as proposed, not on punishing the plan company for the events that led to its difficulties.
Practical Lessons for Plan Companies and Creditors
1. Meeting the s.901G cram-down conditions is the beginning, not the end
Satisfying Conditions A and B under s.901G (establishing that at least one in-the-money class approves and that dissenting creditors are no worse off than in the relevant alternative) is necessary but not sufficient. The court retains a broad discretion on fairness and will scrutinise value allocation closely in a contested cram-down. The question of whether HMRC is worse off “in a wider sense than is prescribed for under s.901G(3)” may still be relevant on discretion.
2. Evidence on the allocation of restructuring benefits is critical
Post-Petrofac, it is not sufficient to show that dissenting creditors receive more than they would in the relevant alternative. Where significant value accrues to new money providers or secured creditors, the plan company must provide cogent evidence that the allocation is fair. The absence of that evidence will not be overlooked. Waldorf’s second plan was able to demonstrate fairness through a concrete arm’s-length transaction price and the negotiated allocation of the transaction proceeds to its creditors.
3. Genuine engagement across all creditor classes is required from the outset
A plan company that negotiates with its supporting classes and does not meaningfully engage with creditors it intends to cram down will face difficulties at sanction. The 2025 Practice Statement now requires evidence of that engagement to be before the court at the convening stage. Early engagement is not optional. Where mediation is offered and appropriate, a creditor that declines to participate runs the risk that its refusal is held against it.
4. The Contingent Payment Proposal precedent: court modification has limits
Where a plan has been agreed by all other plan creditors following detailed commercial negotiations, the court will be slow to impose fundamental modifications as a condition of sanction. Imposing a remedy that would restructure the deal (particularly if it risks the viability of the underlying transaction) is not a realistic option. Plan companies should address any outstanding creditor concerns before the sanction hearing, not rely on the court to engineer a compromise at the last stage.
5. The relevant alternative must be evidenced rigorously
Both the Petrofac High Court and Court of Appeal grappled extensively with competing analyses of the relevant alternative. Waldorf raised the further complexity of what happens to tax losses in the alternative. Plan companies should anticipate credible challenge and ensure their evidence, including on what the most likely alternative outcome would involve, is robust, independently supported and capable of withstanding cross-examination.
6. HMRC-specific considerations apply on top of the general framework
Plans proposing to compromise tax debt face a heightened fairness burden. HMRC’s public function, involuntary creditor status and the nature of the underlying liability will all be examined by the court. Plans compromising tax liabilities should be designed with particular care: early engagement, realistic recovery comparators, and a clear evidence-based fairness case. HMRC cannot veto a plan that satisfies the statutory conditions, but its views, in Green J’s words, deserve the “greatest of respect and weight”.
Conclusion
“Any company putting forward a restructuring plan that seeks to cram down HMRC will have to satisfy the jurisdictional hurdles in Part 26A as well as demonstrating that the plan, including its treatment of HMRC, is fair. The court will continue to scrutinise carefully the particular circumstances around any plan and will exercise its discretion at the sanction hearing in accordance with the principles now established in recent authorities.” — Green J, Waldorf
Waldorf is not a simple pro-debtor decision, nor is it merely a case about HMRC. It is a judgment that illustrates what the post-Petrofac regime requires of a plan company.
The cross-class cram-down power remains available, but it is a power designed to overcome unjustified holdouts, not to impose terms on creditors who have been inadequately engaged or offered an unfair share of restructuring value. The easy cram-down, the model inherited from Virgin Active under which a de minimis payment clearing the jurisdictional threshold was largely sufficient, is gone. In its place following the Court of Appeal trilogy and the 2025 Practice Statement is a regime that requires plan companies to demonstrate genuine engagement across all stakeholder classes, a transparent and evidence-based allocation of restructuring value, and a fairness case capable of withstanding close judicial scrutiny.
For distressed companies facing material creditor opposition, the message is clear: process discipline and evidential rigour are prerequisites for a successful restructuring plan.
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