Offshore drilling contractor Seadrill Partners has filed voluntary petitions under Chapter 11 of the Bankruptcy Code to preserve value and to continue the operation and marketing its assets.
Seadrill said on Tuesday that it has been in negotiations with an ad hoc group of lenders under the company’s Term Loan B credit facility regarding a consensual reorganization of its balance sheet.
In consultation with the ad hoc group, Seadrill filed voluntary petitions under Chapter 11 for bankruptcy protection.
The company added that it would use the bankruptcy process to ensure that all customer, vendor, and employee obligations were met without interruption and complete a consensual restructuring of its debt.
It is worth reminding that Seadrill has been working with its senior creditors to provide an interim solution to the high cash outflow for debt service since the end of 2019. In June, the company moved to delist from NYSE and focus upon the Oslo Stock Exchange going forward.
Earlier this year, Seadrill said it entered into forbearance agreements with certain creditors in respect of the group’s senior secured credit facility agreements, senior secured notes, and guarantee facility agreement.
Under the forbearance agreements, the consenting creditors have agreed not to exercise any voting rights, or otherwise take actions, in respect of certain events of default that may arise under the senior secured credit facility agreements, senior notes and guarantee facility agreement as a result of the group not making certain interest payments falling due in September 2020 under the group’s senior secured credit agreements until and including the earlier of 29 September 2020 and any termination of the forbearance agreements.
Notably, the forbearance has not been agreed concerning termination events that may arise under the company’s leasing agreements in respect of the West Hercules, West Linus, and West Taurus rigs.
The purpose of the forbearance agreements was to allow the company and its stakeholders more time to negotiate on the head terms of a comprehensive restructuring of its balance sheet.
In late November, while trying to restructure its debt, Seadrill managed to agree on the suspension of payments with creditors related to leasing arrangements for the three rigs and the corresponding financing agreements.
Seadrill just one of many drillers in peril
Chapter 11 protection has been a common occurrence in the offshore driller world in 2020. To prove that point we will mention several cases which happened during the year.
Namely, Diamond Offshore started voluntary Chapter 11 proceedings to restructure and strengthen its balance sheet back in April. Also, Valaris – offshore drilling contractor with the world’s largest fleet – filed for bankruptcy protection in August.
More recent examples which did the same thing were Pacific Drilling and Noble Corporation – worth noting, Noble announced it was preparing to exit Chapter 11 in early November and a bankruptcy court approved its reorganization plan just last week.
An honourable mention goes to Borr Drilling which is facing a very challenging financial situation in 4Q, going into 2021, amid difficult market environment combined with payment delays for its rigs working for Pemex.
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