Seadrill receives approval for bankruptcy exit plan

June 2018 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2018 Issue

Another casualty of the continued downturn in the oil and gas industry, global offshore oil and gas drilling company Seadrill Limited received court approval for its plan to restructure its finances and rid itself of billions of dollars of debt.

Confirmed by the US Bankruptcy Court for the Southern District of Texas, the plan – which aims to create a more sustainable financial structure and ensure Seadrill is well-positioned for the future – received near unanimous support from the company’s stakeholders.

Emergence from Chapter 11 is expected in late June or early July 2018.

Seadrill’s plan of reorganisation strengthens its capital structure with $1.08bn of new capital, extending and re-profiling $5.7bn of secured bank debt, and converting $2.3bn of unsecured bonds to equity, while leaving the company’s employee, customer and ordinary trade claims largely unaffected. Once implemented, the plan will give Seadrill a strong liquidity position that will enable it to take advantage of a market recovery and to deliver its business plan.

Additionally, the plan will raise about $1bn in new debt and equity through a rights offering led by Seadrill’s largest shareholder, John Fredriksen, and investment firm Centerbridge Credit Partners LP. Mr Fredriksen will retain an approximate 30 percent stake in a restructured Seadrill, up from a previous 24 percent.

“Like many companies operating in the oil and gas industry, Seadrill has been impacted by the downturn in the oil and gas industry,” said Seadrill in a statement. “Restructuring our finances will allow us to build a bridge to the upturn in the industry when fleet utilisation and day rates return to more normal levels.”

In addition to a restructuring support agreement with key stakeholders, Seadrill is also implementing a balance sheet restructuring as part of the Chapter 11 process. Furthermore, the company has confirmed that it will continue all normal day-to-day operations throughout the restructuring process and serve customers without interruption.

“Confirmation of the plan represents a major accomplishment for Seadrill and all our stakeholders,” said Anton Dibowitz, chief executive and president of Seadrill Management Ltd. “The near unanimous support for the plan we put forward demonstrates the level of backing we have had from all stakeholders. It also reflects the hard work we have all put in over many months to successfully recapitalise the company.”

Mr Dobowitz has also said that, while the company has no immediate plans, expanded relations with Schlumberger, the world’s largest oil services firm, and other suppliers to the global oil and gas industry, had been discussed. “We are in discussions with all major oil service companies, and if there are opportunities that make sense for us, we will certainly entertain them,” he said.

Operating from five regional offices around the world – Oslo, Dubai, Houston, Rio De Janeiro and Ciudad del Carmen – Seadrill and its affiliates own or lease 51 drilling rigs. The company’s fleet of rigs comprises drillships, jack-up, semi-submersibles and tender rigs for operations in shallow to ultra-deepwater areas in both harsh and benign environments. Operating one of the youngest and most modern of all the major offshore drilling contractors, Seadrill is recognised for providing the highest quality operations, in some of the most challenging sectors of offshore drilling.

The Seadrill statement concluded: “There is no question that Seadrill is a great company with the best people in the industry. Following the restructuring process we will have the platform and strengthened balance sheet to continue to develop our business and serve our customers with the high standards they have become accustomed to.”

Fraser Tennant