In simple terms, Petrofac’s restructuring initiative currently involves writing off $900 million of senior secured funded debt and an estimated $3 billion of unsecured debt, alongside the injection of new money.

The aim is to rescue a contractor that first hit serious financial difficulties in 2017 when — along with other companies — it was investigated by the UK’s Serious Fraud Office for suspected bribery, corruption and money laundering.

Petrofac pleaded guilty to seven offences of failing to prevent bribery by associated persons, and and was ordered to pay a fine and costs totalling £77 million ($103 million).

The contractor reviewed its corporate governance and overhauled its compliance systems and controls, but continued to suffer commercially, a situation exacerbated by the Covid pandemic and the war in Ukraine.

In November 2021, Petrofac completed a refinancing which comprised a $250 million capital raise, issuing $600 million of senior secured notes, creating two new bank facilities, and the extension of an existing $50 million senior secured-term loan facility.

By September 2023, it was evident that these efforts failed to stabilise the group’s finances, so the company began exploring restructuring options, according to a recent judgment from the UK Court of Appeal.

The court was asked to consider two appeals brough by Saipem and Samsung E&A — two Petrofac creditors — against the Petrofac restructuring plan that had been approved by the High Court of England & Wales in May 2025.

Earlier this month, the Court of Appeal threw out one appeal, while the other succeeded, as a result of which Petrofac’s ability to rise from the ashes is in question.

It is clear from the judgement that one big issue which dragged Petrofac ever deeper into a financial quagmire stemmed from a legacy, fixed-price contract in Thailand that turned ugly.

In October 2018, a joint venture of Petrofac, Saipem and Samsung E&A was chosen by Thai Oil to upgrade a refinery in Thailand.

The appeal court judge said this "clean fuels" contract was “disastrous” and was beset with problems which has seen costs spiral.

Saipem and Samsung E&A served termination notices on Thai Oil on 23 April 2025, with Thai Oil serving its own termination notice the following day.

There are now market concerns that Thai Oil’s suspension of the project could change the terms of Saipem’s merger with Subsea7 and may even see that deal fall through, according to analysts at Rothschild & Co/Redburn.

This botched contract has given rise to substantial claims — currently under arbitration — by Thai Oil.

Petrofac chief financial officer Afonso Reis e Sousa told the appeal court that the liabilities linked to the Thai Oil contract present an “existential threat” to the group’s viability as a going concern.

Petrofac and Saipem are each on the hook for 36% of Thai Oil’s claims, with Samsung E&A liable for 32%.

The judgement said Thai Oil’s claim is “assumed to be in the region of $1.627 billion,” but could be "much more" or "much less."

If Saipem and Samsung have to pay more than their identified share of liabilities, they would have claims for a contribution, or indemnity, against Petrofac.

Separately, the two companies have direct claims totalling $119.5 million against Petrofac, according to the judgement, which said that all claims related to the Thai Oil project will be compromised under Petrofac’s restructuring plan.

In addition, said the appeals court judgement, three banks — ABN Amro, Argonaut and HSBC — have crystallised and contingent claims against Petrofac arising out of performance guarantees and counter-guarantees they gave in relation to the clean fuels project in Thailand.

ABN Amro’s claim amounts to $29.6 million while Argonaut’s totals $20 million. Both would be compromised if Petrofac’s rescue plan moves ahead.

HSBC’s claim tots up to $49.7 million but will not be compromised under the Petrofac plans because it has agreed to enter into a bilateral arrangement under which its claim will be converted into a new senior secured term loan.

Saipem and Samsung E&A weigh up Petrofac ruling