Petroceltic staff holdouts appoint William Fry in examinership row

A group of senior staff at Petroceltic International, the exploration company that is on the verge of being bought out of examinership by its biggest shareholder, have retained William Fry to advise them following their rejection of a proposed scheme of arrangement that would cost them more than $4 million (€3.6 million).

The staff, including senior executives and management, are due to receive just 5 per cent of monies owed to them under “change of control” clauses in their contracts. The total sum owed is more than $4.5 million.

Petroceltic is on the verge of being bought by Worldview Capital, a Swiss-Cayman fund that was previously engaged in a bitter dispute with Petroceltic's management.

A series of creditors’ meetings were held yesterday at which the examiner, Michael McAteer of Grant Thornton, sought approval for a scheme of arrangement.

The scheme was approved by most classes of creditors, including the all-important group of secured lenders that also includes Worldview.

However, all employee classes voted against the scheme, potentially setting up a courtroom row over the examinership.

The rejection by employees of the scheme, which will see Worldview take control of the company for a cash injection of $7.8 million, does not automatically delay a resolution of the examinership.

However, the High Court has the discretion to take the views of the staff into account when deciding whether or not to approve the scheme. The matter is due back in court today for a brief update. A full hearing is expected to take place next week, at which the senior staff would be entitled to raise an objection.

Massive discount

Up to 30 Petroceltic staff are affected. A group of about half of that number have appointed William Fry to engage with the examiner and try to get them a better deal. It is understood they have also sought the opinion of a senior counsel.

The proposed scheme will see Petroceltic’s 9,000 shareholders effectively wiped out for a nominal payment of 31 cent each.

The company's secured debt of $240.8 million will be subject to a $1 million haircut. Prior to the examinership, this debt was bought out at a massive discount by Worldview and Elbrus Capital, another Cayman fund.

Unsecured creditors, whose debts are $14.6 million, will get a payment of 5 per cent of their debts. Most of this cash is due to Hess, a multinational oil company with which Petroceltic explored for oil and gas in Kurdistan.

All employees and contractors will get 5 per cent of sums owed, while all share options will be eliminated for a nominal payment to each option holder of €1.

The employees holding out are hoping for a better deal from Worldview. If they succeed in collapsing the examinership, the company could potentially be pushed towards liquidation.