Parker Drilling files for pre-packaged Chapter 11 bankruptcy
February 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
February 2019 Issue
In a move designed to significantly reduce its debt and provide access to substantial capital commitments, drilling services and rental tools provider to the energy industry Parker Drilling Company has entered into a comprehensive restructuring support agreement (RSA).
To implement the terms of the RSA, Parker has voluntarily filed for Chapter 11 protection in the US Bankruptcy Court for the Southern District of Texas. The company’s non-US subsidiaries and certain US subsidiaries are excluded from the filing and will not be affected. Furthermore, Parker intends to seek confirmation of a pre-arranged plan of reorganisation.
Parker’s plan, which is subject to court approval, reduces approximately two-thirds of funded debt and injects $95m of new, fully committed equity capital through a backstopped rights offering. It also contemplates the issuance of a new $210m second-lien term loan due to satisfy the remaining existing notes. Current preferred equity holders, as well as common equity holders if the class votes to approve the plan, will receive reorganised equity and warrants.
Members of the consenting stakeholders have indicated their support for the proposed plan.
In addition, Parker anticipates that its cash flow and existing liquidity will be sufficient to support global operations during this period and has further augmented liquidity with access to $50m in debtor-in-possession (DIP) financing. The lenders under the DIP financing have also committed to fund an exit facility of $50m, which may be increased following emergence.
“Our operational results have continued to improve this year, and we anticipate new opportunities for profitable growth across our drilling and rental tools businesses,” said Gary Rich, chairman, president and chief executive of Parker Drilling. “The bankruptcy and restructuring steps will ensure that we have the appropriate capital structure to take advantage of these opportunities to strategically grow our assets, our global footprint, and our suite of products and services.
“We are confident that by resolving our legacy balance sheet issues, we will continue executing a strategy to build greater scale in core markets and expand strategic offerings, while strengthening our drilling and rental tools businesses,” he continued. “We expect these efforts to drive additional efficiencies while providing greater flexibility and more options for customers over the long term.”
Throughout the bankruptcy and restructuring process Parker intends to continue to pay employee wages, benefits and trade creditors in full, with minimum disruption expected.
“Throughout this process, our firm commitment remains to provide our customers with safe, reliable and efficient operations,” added Mr Rich. “Customers should see no changes to our products and services, and we appreciate their continued support while we complete this restructuring. I also want to thank our suppliers, whose partnership will remain vital during and after this process. We have worked closely with the consenting stakeholders and appreciate their clear commitment to the long-term success of the business.”
Serving as legal adviser to Parker in connection with the restructuring is Kirkland & Ellis LLP, with Moelis & Company serving as investment banker and Alvarez & Marsal serving as financial adviser. Akin Gump Strauss Hauer & Feld LLP is serving as legal adviser and Houlihan Lokey as financial adviser to the consenting stakeholders.
Parker expects to complete the restructuring process in the first quarter of 2019, with the existing management team remaining in place.
Mr Rich concluded: “I am confident that the strength of our complementary business lines, combined with a solid financial platform, will position Parker to lead the industry as market conditions improve.”
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