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NYSE-listed offshore drilling contractor Pacific Drilling has filed for Chapter 11 bankruptcy in an effort to restructure $1.1 billion in bond debt. It’s the second time in three years the company has filed for Chapter 11.
The Luxembourg-based company announced Friday that it filed voluntary petitions for relief under Chapter 11 in United States Bankruptcy Court for the Southern District of Texas and it has entered into a restructuring support agreement with an ad hoc group of the largest holders of its outstanding bond debt. The agreement will eliminate Pacific Drilling’s approximately $1.1 billion in principal amount of outstanding bond debt in a debt/equity swap.
The company’s operations this year have taken a hit from the COVID-19 crisis and its negative impact on global oil demand. “The impact of these market conditions on Pacific Drilling’s business has been direct and significantly negative, rendering our current capital structure unsustainable over the long-term,” the company said.
Pacific Drilling said it expects to emerge from Chapter 11 by year-end with access to new capital in the form of an $80 million exit facility and with approximately $100 million of cash and cash equivalents on the balance sheet.
The company previously filed for Chapter 11 in November 2017 in order to restructure to approximate $3 billion in outstanding debt amid the unprecedented and prolonged downturn in the offshore drilling industry after oil prices started crashing in late 2014. It emerged about year later having raise $1.5 billion in new capital, consisting of $1.0 billion of new secured notes and $500 million of equity.
“With approximately $120 million of cash and cash equivalents as of October 30, 2020, and seven of the most advanced high-specification drillships in the world, Pacific Drilling intends to continue its world-wide operations as usual, deliver services for existing and prospective clients and, subject to court approval, pay all obligations incurred during the Chapter 11 case in full,” the company said in a statement last Friday.
“After spending several months evaluating options for addressing our long-term financial needs in light of challenging market and operational conditions, we are pleased to reach agreement with an ad hoc group of our noteholders that paves the way for an expeditious Chapter 11 restructuring process,” commented Bernie Wolford, Pacific Drilling’s Chief Executive Officer. “This restructuring is intended to enhance our financial flexibility by eliminating our entire prepetition debt and cash interest burden. We expect to emerge from this process in a stronger position to compete in today’s challenging, lower-commodity-price environment. I appreciate the ongoing support of our employees, clients and vendors as we complete this accelerated restructuring process. We remain committed to delivering the safest, most efficient and reliable deepwater drilling services in the industry.”
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