Why the Waldorf case matters: a simple guide to a landmark business rescue

Speed read

Waldorf is an oil and gas group which had significant debts, including debts owed to HMRC. It asked the court to approve a restructuring plan that would involve a reduced recovery for a number of creditors. The court accepted that those creditors would be better off in a restructuring plan than in an insolvency (the “no worse off” test), but initially refused the plan because it considered that Waldorf had not properly engaged with creditors and had not demonstrated that the restructuring surplus (i.e., the extra value created by the restructuring plan compared with an insolvency) was being shared fairly. Later, revised plans involving the sale of the business to Harbour Energy were approved after much greater engagement with creditors. Judgments on the plans given by the courts in Scotland and in England & Wales are important because they emphasise that restructuring plans are not just about satisfying the no worse off test; companies must also demonstrate a fair distribution of the restructuring surplus and meaningful creditor engagement.

Background

The Waldorf restructure is an important case that signifies a shift in the law on restructuring plans and will change the way the market approaches aspects of business rescue.

Waldorf is an oil and gas group which owed significant debts to a number of creditors, including HMRC. Unable to pay all of its creditors in full, Waldorf was faced with disagreement between creditors about the level of repayment that they should receive.  At the same time, it was trying to preserve value in its business by avoiding a formal insolvency process. 

Waldorf’s management and a number of its creditors believed that a restructure offered the best chance of preserving value and eventually achieving a sale of the business. Waldorf set out to achieve this by applying to the courts for restructuring plans in Scotland and in England & Wales.

A restructuring plan is a court-approved process that helps a financially distressed company reduce or reorganise its debts so it can survive and avoid insolvency.  Restructuring plans can overcome significant opposition from creditors and shareholders because the court has the power to approve a restructuring plan even where an entire class of creditors or shareholders has voted against it, provided an “in the money” class of creditors approves the plan. This mechanism is called "cross-class cram down".

On the back of other market-shifting restructuring cases (like Thames Water and Petrofac), Waldorf triggered a broader debate about the fair treatment of creditors – including HMRC – in a restructuring plan. Namely, when a restructuring plan requires some creditors to accept less than they are owed in order to rescue a business, how should the restructuring surplus (i.e., the extra value created by the restructuring plan compared with an insolvency) be shared among creditors?

Waldorf's first attempt

In Spring 2025, Waldorf Production UK Plc launched RP1, its first – and ultimately unsuccessful – restructuring plan in the English court. (Originally, a parallel restructuring plan for Waldorf CNS (I) Limited was set to go to court in Scotland, but did not go ahead when the English RP1 was unsuccessful).

RP1 centered on the restructure of the group so that it could be sold (but without a buyer lined up). If successful, this would have resulted in the secured creditors of Waldorf being kept whole (but with an extended maturity date and other amendments to their debt), with unsecured creditors (including HMRC) receiving a relatively modest return in exchange for their debts being extinguished in full. Waldorf relied on expert evidence showing that those unsecured creditors would receive more under RP1 than they were likely to receive in an insolvency. 

In previous restructuring plan cases, this sort of evidence had been enough to persuade the court to approve a plan. However, following a number of more recent court decisions (which were going through the courts while RP1 was being formulated), the court carried out a much wider-ranging assessment of fairness.

Although the judge in RP1 accepted that the unsecured creditors (who challenged RP1) would likely be better off under the plan than in an insolvency, the court refused to approve the plan because it considered that Waldorf had not done enough to engage with its unsecured creditors before launching the plan, or to explore what a fair sharing of the restructuring surplus might look like.

The bigger picture 

RP1 established some important points: 

(1) Where creditors are being asked to give up valuable rights, and particularly where the court is being asked to exercise the power of cross-class cram down, there must be a credible explanation for why the distribution of the restructuring surplus is fair.

(2) Process matters as much as the outcome: plan companies should engage with creditors, even where they are out-of-the-money, giving them the opportunity to negotiate and voice their concerns.

The impact of these points is that fairness has become a much more important factor for the court in considering whether or not to approve a restructuring plan. 

The second plan

Following the failure of RP1, Waldorf returned with a new restructuring proposal, RP2.

Whereas RP1 centered on the restructure of the group so that it could be sold (but without a buyer lined up), the premise of RP2 was the restructure of the group so that it could be sold to a confirmed buyer, Harbour Energy. (Between the formulation of RP1 and RP2, Harbour Energy had emerged with an acceptable offer to acquire the business.) The offer from Harbour Energy provided an opportunity to propose a restructure on new terms, paving a workable route to preserving value and avoiding insolvency.

Addressing the need to have greater engagement with its creditors, Waldorf launched a mediation process with the creditors subject to RP2, to agree a sharing of restructuring surplus that was acceptable to them. HMRC refused to participate in the mediation and continued to oppose the sharing mechanism. This meant that cross-class cram down would be required to implement the restructure and enable the sale of the business to Harbour Energy. 

In early 2026, Waldorf launched RP2 in the courts in England & Wales and in Scotland. This time, and despite the continued opposition from HMRC, the courts sided with Waldorf and approved RP2, cramming down HMRC.

Why HMRC's opposition was important 

One of the most closely watched aspects of the case was the role of HMRC – the only creditor who opposed RP2. Its main arguments were:

(1) A restructuring plan was incapable of compromising HMRC where it had voted against the plan.

(2) Harbour Energy would gain an extra benefit from buying the Waldorf group, by potentially using tax losses in the Waldorf group to reduce future tax bills. HMRC argued that this benefit to Harbour Energy would have a negative impact on HMRC returns (because of potentially reduced tax revenues from Harbour Energy). This factor should be considered when comparing the restructuring plan with insolvency (i.e. the no worse off test).

(3) Even if those tax benefits were ignored in the no worse off test, HMRC argued that the existence of those benefits (and the negative impact they would have on HMRC) made the proposed sharing of the restructuring surplus unfair.

The courts in Scotland and in England & Wales comprehensively rejected HMRC's arguments and approved RP2. This reinforced an important point: HMRC is an influential and, in some respects, special class of creditor, but it does not have a veto over a restructuring plan. The court will listen carefully to HMRC's concerns, but those concerns must be weighed against the interests of all other stakeholders, the available evidence and the broader objective of rescuing viable businesses.

Lessons from Waldorf 

The practical lessons from Waldorf are clear.

(1) Engagement matters.

The court will expect meaningful engagement, including with creditors who are out-of-the-money. Businesses proposing a restructuring plan should approach creditors early and try to find common ground.

(2) Fairness is important.

A company must be able to explain not only why its proposal is better than insolvency, but also why the sharing of the restructuring surplus is fair.

(3) Evidence is critical. 

The company proposing the restructuring plan cannot just state that the proposed plan is reasonable. They must be able to objectively show, based on factual and/or expert evidence, why the proposal represents a fair outcome for the parties subject to the plan.

(4) Restructuring plans can be powerful tools for business rescue. 

Provided that the plan company has met the requirements on engagement, fairness and evidence, the courts in England & Wales and Scotland showed in Waldorf that restructuring plans can be used to implement novel restructures where a compelling and fair commercial case exists.

The lasting significance

The reason Waldorf has attracted attention is that it reflects a broader shift in the law on restructuring plans.  The test is no longer just about whether a creditor is better off than in an insolvency.  It’s increasingly about fairness, engagement and the appropriate sharing of the restructuring surplus. For companies pursuing a restructure, the message is clear: winning the argument is not enough. You have to win it fairly. That is why Waldorf is an important restructuring case. It has changed the conversation from "Is this better than insolvency?" to "Is this a fair deal for everyone involved?"

Burness Paull LLP acted for Waldorf CNS (I) Limited, the Scottish entity in the Waldorf group that applied to the Court of Session in Scotland for a restructuring plan.  Michael Thomson, Fiona Carlin, Doug Blyth, Riccardo Alonzi, Steph Cowie and Mairead Smith comprised the Burness Paull team.

Garry Borland KC and Elisabeth Roxburgh appeared as Counsel for Waldorf CNS (I) Limited on the instruction of Burness Paull LLP.

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