Moelis wins $3.4 million restructuring fee dispute despite being sidelined before refinancing

The High Court has ruled that Moelis & Company UK LLP is entitled to approximately US$3.4 million in restructuring fees from Emirates Petroleum Company (Emarat), rejecting the Dubai-based state-owned company's argument that the investment bank had not earned its commission because it did not directly bring about the refinancing transactions. Stuart Ritchie KC, sitting as a Deputy High Court Judge, held that an adviser engaged to provide strategic and financial advice need not be the effective cause of a transaction to earn a success fee unless the contract imposes that requirement. The Court also found that Emarat's decision to suspend Moelis's engagement did not extinguish its right to fees on transactions completed during the suspension.

The dispute arose from Emarat's efforts to restructure approximately AED 4.75 billion in bank debt, with several facilities due to mature between 2023 and 2026. Under an engagement letter agreed in April 2023, Moelis was entitled to monthly retainers of US$110,000, together with a restructuring fee of 0.25% of existing debt restructured, subject to a US$3 million minimum. The agreement also provided for a 0.9% fee on new debt financing and a 3% fee on new equity financing.

Moelis developed a financial model and advised Emarat and its shareholder, the Emirates Investment Authority, on restructuring alternatives, including extending existing debt maturities, changing guarantee arrangements and disposing of non-core assets. However, in June 2023, shortly after receiving Moelis's advice and approving a restructuring strategy, Emarat exercised its contractual right to pause the engagement and suspend monthly retainer payments. Emarat subsequently entered into extensions and refinancing arrangements with First Abu Dhabi Bank, Abu Dhabi Commercial Bank and Emirates NBD, prompting Moelis to claim approximately US$10.5 million in success fees, or alternatively US$3.4 million in restructuring fees alone.

Emarat argued that the transactions were largely routine extensions rather than substantive restructurings, that Moelis had not performed the services necessary to earn commission, and that the suspension prevented further fees from becoming payable.

Stuart Ritchie KC rejected those arguments, distinguishing between agents engaged to procure a specific transaction and financial advisers retained to provide advice and support. Drawing on authorities including EMFC Loan Syndication LLP v The Resort Group plc and Edmond De Rothschild Securities (UK) Ltd v Exillon Energy plc, the judge found that the requirement for an adviser to be an effective cause of a transaction depends on the terms of the particular contract. Moelis's engagement contained no such requirement, and the Court found that it had performed the services required before the suspension. Emarat could not criticise Moelis for failing to participate in subsequent lender negotiations when it had itself prevented the adviser from continuing its work.

The Court also rejected Emarat's contention that the refinancing transactions were insufficiently substantial to trigger commission payments, finding that extensions involving changes to loan maturities and interest terms fell within the agreement's broad definition of restructuring. It further held that suspending monthly retainers did not suspend or extinguish Moelis's entitlement to transaction fees.

However, the Court sided with Emarat on the distinction between restructuring existing debt and raising new capital. The higher 0.9% fee could only be triggered where Emarat increased its overall financing, rather than merely replacing existing borrowings with facilities from different lenders. The judge warned that Moelis's interpretation could produce commercially irrational results, allowing additional commissions each time existing debt was refinanced with another lender.

The Court accordingly dismissed Moelis's primary claim for approximately US$10.5 million but upheld its alternative claim for restructuring fees. The decision confirms that, depending on the contractual language, success fees can remain payable even where an adviser is sidelined before a transaction closes, while reinforcing the distinction between refinancing existing indebtedness and raising genuinely additional capital.

Read the decision here.

Matthew Hardwick KC and Charlotte Eborall, both of 3 Verulam Buildings, instructed by Simmons & Simmons, represented Moelis. Paul Downes KC of Quadrant Chambers, instructed by Clyde & Co, represented Emarat.