Seadrill took a key milestone on September 3 in its efforts to complete its second bankruptcy reorganization in the past four years. The offshore drilling contractor said the U.S. Bankruptcy Court for the Southern District of Texas had approved the company’s proposed measures for the proposed reorganization. The court set a schedule for voting on the plan and scheduled a hearing on October 26, 2021 for approval of the plan.
According to the company’s announcement, the court actions “pave the way for our Chapter 11 exit in the fourth quarter of 2021. The plan provides a clear path for Seadrill to restructure its balance sheet, as the company has already secured majority support. of its leaders. secured lenders.
The company, best known for its lead investor John Fredriksen, however, still faces an uphill battle to complete the reorganization. When it filed for Chapter 11 bankruptcy in February 2021, the company said it had $ 6.1 billion in funded debt, including $ 5.6 billion in bank debt, plus an additional $ 535 million in its guaranteed tickets. Seadrill continues to report losses and, in an attempt to rebalance operations, offered to recycle 10 of its vessels from its fleet which included 7 drill ships, 15 jack-ups and 12 semi-submersibles. So far, two platforms have been sold and five are in the process of being recycled.
Formed in 2005. Seadrill is supporting debtors in the pending case that its previous bankruptcy in 2018 successfully restructured the business. Describing the 2018 process, the company says, “Seadrill deleveraged its balance sheet by billions of dollars, lengthened the maturity of its remaining debt, and positioned Seadrill to take advantage of an improving oil and gas market.
They argue that the previous plan received broad support but failed due to the impact of COVID-19 on the global oil market as well as the OPEC-Russia oil price war. “These external forces combined to prevent Seadrill from reaping the benefits of the previous restructuring.”
The general terms of the new plan provide that the majority of the secured debt will be revalued to $ 750 million, for which creditors will receive 83% of the equity of the new company and will be entitled to participate in a new senior lien of $ 300 million. ease of financing the business. Other debtors get varying amounts of collection as Fredriksen largely forgoes his shares with only a quarter of a percent of the new equity and a stake in a small unsecured debt that would be converted into shares.
The bankruptcy plan was complicated by the fact that Seadrill had 12 large tranches of debt and it was difficult to reach consensus between the groups. As such, the company currently only has the agreement of just over half of secured creditors (58%) and will need to secure the support of over two-thirds of creditors in the next vote for the plan to succeed. .
In addition, there is a rumor that two or perhaps three competitors have already submitted alternative plans to creditors. Reuters reports that competitors Noble Corp. made an asset purchase offer as well as a competing combined offer of Transocean and Dolphin Drilling, possibly with other participants with the aim of splitting Seadrill.
“The Court has approved our schedule for approving the restructuring and has given us permission to solicit votes from the lenders,” commented CFO Grant Creed. “This will pave the way for significant deleveraging on the balance sheet. We are satisfied with these developments, which put us firmly on the right track for the emergence of Chapter 11. ”
Creditors’ votes are due by October 7 and the final report on the vote by October 22. Under the current schedule, the court would meet to review the plan and, pending a vote by creditors, approve the plan so the company can complete the process.