Seadrill Presents to Bankruptcy Court Plan with Creditor Support
Seadrill Limited, the financially troubled offshore drilling contractor controlled by John Fredriksen, is making progress on its second trip through US bankruptcy court in the past four years. In a filing with the court, the company reported on Saturday, July 24, that it has reached an agreement with just over half of its senior secured lenders and asked for the court’s approval of the reorganization plan. News of the agreement comes just days after speculation that the company would be broken up and sold to competitors.
According to the filing, senior secured lenders holding approximately 57.8 percent of the company’s senior secured loans have entered into a plan support agreement and the company also has a backstop commitment letter entered into with certain of the consenting lenders. The agreements call for raising $350 million in new financing and reducing Seadrill’s liabilities by over $4.9 billion.
“We are pleased to announce that we have reached a consensual deal with a large element of Seadrill’s secured lenders that will pave the way for a significant balance sheet deleveraging,” said Seadrill CEO Stuart Jackson. “It has taken time to reach the right outcome but throughout the process, we have maintained strong support from our creditors, and we look forward to maintaining that as they become our shareholders as well as our lenders.”
Seadrill said in its announcement that the plan provides a clear pathway to restructure its balance sheet with the support of the majority of its senior secured lenders. Certain of the consenting lenders have also agreed to backstop a first lien exit facility totaling $300 million. The lenders participating in (and backstopping) the new-money facility will collectively receive 16.75 percent of new equity in the newly constituted Seadrill. Under the plan, the senior secured lenders will also exchange $5.6 billion of existing debt for $750 million of second-lien, takeback debt, and 83 percent of the new equity. Hemen Holding Ltd., currently the company’s largest shareholder, has also committed to fund a $50 million new-money unsecured bond to be issued under the plan, which is convertible into five percent of the new equity under specified circumstances.
Specified trade claims will be paid in full in cash and other general unsecured claims will receive their pro-rata share of $250,000 in cash. Existing shareholders will receive 0.25 percent of the new equity, if all voting classes of creditors accept the plan, or otherwise will not receive any recovery.
Seadrill, which operates 24 rigs including drillships, jack-ups, and semi-submersibles, became the latest in a series of offshore companies to file for bankruptcy in February 2021. It marked the second time the company had begun bankruptcy proceedings. In 2017, the company did a prepackaged deal that gave Seadrill $1 billion in new financing and relieved it of $2.4 billion in unsecured bond debt.
The new plan was filed with the United States Bankruptcy Court for the Southern District of Texas with the company saying it will proceed expeditiously to obtain Bankruptcy Court approval. The agreements include a milestone for Bankruptcy Court approval of the plan by November 5, 2021.
Last week, Reuters reported speculation that several of the company’s major competitors were working together to acquire the assets of Seadrill. Reuters said other offshore companies, including Noble Corp Transocean and Dolphin Drilling were collaborating on a proposal to buy and break up the company.
The current proposal is subject to court approval as well as customary closing provisions.