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Seadrill Reaches Joint Restructuring Deal with Creditors

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February 26, 2018

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ReutersBy Nerijus Adomaitis and Tom Hals OSLO/WILMINGTON, Del., Feb 26 (Reuters) – Shipping tycoon John Fredriksen has reached an agreement with a majority of creditors over a restructuring plan for oil rig firm Seadrill Ltd, according to U.S. court documents on Monday.

The company, once the world’s largest offshore driller by market value, filed for Chapter 11 bankruptcy protection with debt and liabilities of over $10 billion last September after a sharp drop in oil prices in 2014 cut demand for rigs.

“It’s good for all parties that Seadrill comes out of an expensive and time-consuming process,” said Frederik Lunde, head of research at brokerage Carnegie.

Under an amended plan, supported by 99 percent of its bank lenders and about 70 percent of unsecured creditors, including South Korean shipyards, the company will raise $1.08 billion in new capital.

Seadrill will issue $880 million in new secured notes, up from $860 million planned previously, and $200 million in new equity, the same level as previously planned.

Thomas Mayer, an attorney for the official committee of unsecured creditors, told a U.S. Bankruptcy Court hearing on Monday in Houston that unsecured creditors ended up with at least a 50 percent larger recovery under Monday’s deal.

He said banks from the start had demanded Seadrill raise fresh capital, which promised investors lucrative returns.

“The whole case came down to who got to make the investment demanded by the banks,” said Mayer, of the Kramer Levin Naftalis & Frankel law firm.

The unsecured creditors’ stake in the new company will increase to 36.4 percent from an initial offer of around 19 percent, while the combined stake of Fredriksen’s family investment vehicle Hemen and Centerbridge will be reduced to 36.4 percent from an original 49 percent, the source said.

It was not immediately clear what stake Hemen will have in the new company separately from Centerbridge, but under the deal, Hemen would be allowed to cut its stake to just 5 percent within three years if it wanted to do so, according to the court documents.

“We wanted this point to be included in the plan in order not to prohibit other companies from coming in and buying Seadrill’s shares in the future, for example, another stronger industry player,” the bondholder source said.

Hemen owned around 24 percent of Seadrill before the company filed for creditor protection to address more than $10 billion debts and liabilities, including $5.7 billion in bank loans and $2.3 billion in unsecured bonds.

Existing equity holders, including Hemen, will receive 1.9 percent stake in the new company, under the amended plan.

Seadrill shares were up 13 percent by 1256 GMT. It was the best performing stock of the Oslo benchmark index .

Seadrill said in the court documents it had also reached an agreement with South Korean Daewoo Shipbuilding & Marine Engineering (SHI) and Samsung Heavy Industries (DSME) over contracts for four newbuild drillships.

Seadrill and two companies agreed they would have combined claims of $1.064 billion. A Seadrill attorney told Monday’s hearing that the company is also trying to resolve the outstanding ship contracts and did not want to lose the vessels to a competitor.

Judge David Jones on Monday scheduled a hearing to confirm the Seadrill plan for April 17. (Reporting by Nerijus Adomaitis in OSLO and Tom Hals in WILMINGTON, Del.,; additional reporting by Ole Petter Skonnord in OSLO and Christopher Spink in LONDON; editing by Jane Merriman and Grant McCool)

(c) Copyright Thomson Reuters 2018.

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