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Exhibit 99.1

 

List of Subsidiaries that are Debtors

 

Paragon Offshore Finance Company

 

Paragon International Finance Company

 

Paragon Offshore Holdings US Inc.

 

Paragon Offshore Drilling LLC

 

Paragon FDR Holdings Ltd.

 

Paragon Duchess Ltd.

 

Paragon Offshore (Luxembourg) S.à r.l.

 

PGN Offshore Drilling (Malaysia) Sdn. Bhd.

 

Paragon Offshore (Labuan) Pte. Ltd.

 

Paragon Holding SCS 2 Ltd.

 

Paragon Asset Company Ltd.

 

Paragon Holding SCS 1 Ltd.

 

Paragon Offshore Leasing (Luxembourg) S.à r.l.

 

Paragon Drilling Services 7 LLC

 

Paragon Offshore Leasing (Switzerland) GmbH

 

Paragon Offshore do Brasil Ltda.

 

Paragon Asset (ME) Ltd.

 

Paragon Asset (UK) Ltd.

 

Paragon Offshore International Ltd.

 

Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited

 

Paragon Holding NCS 2 S.à r.l.

 

Paragon Leonard Jones LLC

 

Paragon Offshore (Nederland) B.V.

 

Paragon Offshore Contracting GmbH

 

 

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Exhibit 99.2

 

PLAN SUPPORT AGREEMENT

 

This PLAN SUPPORT AGREEMENT (as amended, supplemented or otherwise modified from time to time, this “Agreement”), dated as of February 12, 2016, is entered into by and among (i) Paragon Offshore plc (the “Company”), (ii) Paragon International Finance Company, Paragon Offshore Finance Company, Paragon Offshore Leasing (Switzerland) GmbH, Paragon Offshore Contracting GmbH, Paragon Holding NCS 2 S.à r.l., Paragon Offshore (Luxembourg) S.à r.l., Paragon Offshore Leasing (Luxembourg) S.à r.l., Paragon Offshore International Ltd., Paragon Duchess Ltd., Paragon (Middle East) Limited, Paragon Asset Company Ltd., Paragon Asset (ME) Ltd., Paragon Holding SCS 1 Ltd., Paragon Holding SCS 2 Ltd., Paragon FDR Holdings Ltd., Paragon Offshore (North Sea) Ltd., Paragon Asset (UK) Ltd., Paragon Offshore Holdings US Inc., Paragon Drilling Services 7 LLC, Paragon Offshore Drilling LLC, Paragon Leonard Jones LLC, Paragon Offshore do Brasil Ltda., Paragon Offshore (Nederland) B.V., PGN Offshore Drilling (Malaysia) Sdn. Bhd., Paragon Offshore (Labuan) Pte. Ltd., each such entity a subsidiary of the Company (such entities, together with the Company, the “Paragon Parties”), (iii) the undersigned lenders and issuing lenders (the “Revolver Lenders” and, together with their respective successors and permitted assigns and any subsequent Revolver Lender that becomes party hereto in accordance with the terms hereof, the “Consenting Revolver Lenders”) under that certain Secured Revolving Credit Agreement, dated as of June 17, 2014, by and among the Company and Paragon International Finance Company, as borrowers, the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as amended, modified, or otherwise supplemented from time to time (the “Secured Revolving Credit Agreement”), (iv) the undersigned beneficial holders, or investment advisors or managers for the account of beneficial holders (the “6.75% Senior Noteholders” and, together with their respective successors and permitted assigns and any subsequent 6.75% Senior Noteholder that becomes party hereto in accordance with the terms hereof, the “Consenting 6.75% Senior Noteholders”) of the 6.75% Senior Notes due 2022 (the “6.75% Senior Notes”) issued under that certain Indenture, dated as of July 18, 2014, by and among the Company, as issuer, each of the guarantors named therein, and Deutsche Bank Trust Company Americas, as indenture trustee, as amended, modified, or otherwise supplemented from time to time (the “Indenture”), and (v) the undersigned beneficial holders, or investment advisors or managers for the account of beneficial holders (the “7.25% Senior Noteholders,” together with their respective successors and permitted assigns and any subsequent 7.25% Senior Noteholder that becomes party hereto in accordance with the terms hereof, the “Consenting 7.25% Senior Noteholders,” and, together with the Consenting Revolver Lenders and the Consenting 6.75% Senior Noteholders, the “Consenting Creditors”) of the 7.25% Senior Notes due 2024 (the “7.25% Senior Notes,” and, collectively with the 6.75% Senior Notes, the “Notes” and all holders thereof, the “Noteholders”) issued by the Company pursuant to the Indenture.  The Paragon Parties, each Consenting Creditor and any subsequent person or entity that becomes a party hereto in accordance with the terms hereof are referred to herein as the “Parties” and each individually as a “Party.”

 

WHEREAS, the Parties have agreed to undertake a financial restructuring of the Company (the “Restructuring”) which is anticipated to be effected through the plan of reorganization attached hereto as Exhibit A (including any schedules and exhibits attached thereto, the “Paragon Plan”) through a solicitation of votes for the Paragon Plan (the “Solicitation”) pursuant to the Bankruptcy Code (as defined below) and the commencement by each Paragon Party of a voluntary case (the “Paragon Case” and collectively, the “Paragon Cases”) under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

 

WHEREAS, as of the date hereof, the Consenting Revolver Lenders, in the aggregate, hold 89% of the aggregate Revolving Credit Exposure outstanding under and as defined in the Secured Revolving Credit Agreement.

 

WHEREAS, as of the date hereof, the Consenting 6.75% Senior Noteholders, in the aggregate, hold approximately $310,696,000 (68.05%) of the aggregate outstanding principal amount of 6.75% Senior Notes.

 

WHEREAS, as of the date hereof, the Consenting 7.25% Senior Noteholders, in the aggregate, hold approximately $445,569,000 (84.55%) of the aggregate outstanding principal amount of 7.25% Senior Notes.

 

WHEREAS, the Parties desire to express to each other their mutual support and commitment in respect of the matters discussed in the Paragon Plan and hereunder.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

 

 

As used in this Agreement, the following terms have the following meanings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notwithstanding anything in this Agreement to the contrary, the Consenting Revolver Lenders fully preserve all rights to object to any plan of reorganization, including pursuant to Section 3.7 of the Paragon Plan, that seeks to cram down the Consenting Revolver Lender claims arising under the Secured Revolving Credit Agreement, and any ballot previously submitted in favor of such a plan of reorganization by the Consenting Revolver Lenders shall be automatically withdrawn and deemed null and void and each Consenting Revolver Lender may terminate this Agreement as to itself if a cram down of its claims arising under the Secured Revolving Credit Agreement is pursued by the Company.

 

 

 

 

 

Upon the occurrence of a Forbearance Termination Event, the agreement of the Consenting Creditors hereunder to forbear from exercising rights and remedies shall immediately and automatically terminate without requirement of any demand, presentment, protest, or notice of any kind, all of which the Paragon Parties hereby waive (to the extent permitted by applicable law).

 

 

 

 

 

 

 

 

This Agreement shall automatically terminate three (3) business days following the delivery of written notice to the other Parties (in accordance with Section 22) from any of the Requisite Revolver Lenders or the Requisite Noteholders, as applicable at any time after and during the continuance of any Creditor Termination Event; provided that termination by any of the Requisite Revolver Lenders or the Requisite Noteholders shall only be effective as to such terminating Requisite Revolver Lenders or Requisite Noteholders, as applicable, other than as set forth with respect to a Creditor Termination Event in Section 6(a)(ix).  In addition, this Agreement shall automatically terminate in respect to the applicable Consenting Class three (3) business days following delivery of notice from the Company to such Consenting Class (in accordance with Section 22) at any time after the occurrence and during the continuance of any Company Termination Event.  This Agreement shall terminate automatically without any further required action or notice on the Effective Date of the Paragon Plan.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notwithstanding any provision in this Agreement to the contrary, upon written consent of the Requisite Creditors, each of the dates set forth in Section 6(a)(ii) through (v), (xiv), (xv) and (xvii) and upon written consent of the Company, the date set forth in Section 6(b)(iv) through (vii) may be extended prior to or upon such date and such later dates agreed to in lieu thereof and shall be of the same force and effect as the dates provided herein.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)            If to any Paragon Party, to:

 

Paragon Offshore plc

3151 Briarpark Drive

Houston, TX  77042

Attention:  Todd Strickler, Vice President, General Counsel and Corporate

Secretary

Email:  tstrickler@paragonoffshore.com

 

With a copy (which shall not constitute notice) to:

 

Weil, Gotshal & Manges LLP (as counsel to the Company)

767 Fifth Avenue

New York, NY 10153

Facsimile:  (212) 310-8007

Email: gary.holtzer@weil.com and ted.waksman@weil.com

 

 

JPMorgan Chase Bank, N.A., as administrative agent for the Revolver Lenders

383 Madison Avenue

New York, NY 10179

Facsimile: (212) 622-4556

Attn: Neil Boylan

Email: neil.boylan@jpmorgan.com

With a copy (which shall not constitute notice) to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Facsimile: (212) 455-2000

Attention:  Sandy Qusba and Kathrine A. McLendon

Email:  squsba@stblaw.com and kmclendon@stblaw.com

 

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Facsimile: (212) 373-3000

Attention:  Andrew N. Rosenberg and Elizabeth R. McColm

Email:  arosenberg@paulweiss.com; emccolm@paulweiss.com

 

Any notice given by delivery, mail or courier shall be effective when received.  Any notice given by facsimile or electronic mail shall be effective upon oral, machine or electronic mail (as applicable) confirmation of transmission.

 

 

 

 

 

 

[Signature Page Follows]

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their respective duly authorized officers, solely in their respective capacity as officers of the undersigned and not in any other capacity, as of the date first set forth above.

 

	PARAGON PARTIES
	PARAGON OFFSHORE PLC
	By:	/s/Randall D. Stilley
		Name: Randall D. Stilley
		Title:   Chief Executive Officer and President
	PARAGON INTERNATIONAL FINANCE COMPANY
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director
	PARAGON OFFSHORE FINANCE COMPANY
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director
	PARAGON OFFSHORE LEASING (SWITZERLAND) GMBH
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director
	PARAGON OFFSHORE CONTRACTING GMBH
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director

	PARAGON HOLDING NCS 2 S.Á R.L.
	By:	/s/ Sandrine E. G. Algrain
		Name: Sandrine E. G. Algrain
		Title:   Manager
	PARAGON OFFSHORE (LUXEMBOURG) S.Á R.L.
	By:	/s/ Sandrine E. G. Algrain
		Name: Sandrine E. G. Algrain
		Title:   Manager
	PARAGON OFFSHORE LEASING  (LUXEMBOURG) S.Á R.L.
	By:	/s/ Sandrine E. G. Algrain
		Name: Sandrine E. G. Algrain
		Title:   Manager
	PARAGON OFFSHORE INTERNATIONAL LTD.
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director
	PARAGON DUCHESS LTD.
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director
	PARAGON (MIDDLE EAST) LIMITED
	By:	/s/ Oliver L. Betschart
		Name: Oliver L. Betschart
		Title:   Director

 

 

 

 

 

Plan of Reorganization

 

(previously filed)

 

 

Settlement Agreement Term Sheet Between

Paragon Offshore plc and Noble Corporation plc

 

(previously filed)

 

 

FORM OF JOINDER AGREEMENT FOR CONSENTING CREDITORS

 

This Joinder Agreement to the Plan Support Agreement, dated as of [_______], 2016 (as amended, supplemented or otherwise modified from time to time, the “Agreement”), by and among Paragon Offshore plc (the “Company”), the subsidiaries of the Company party thereto, and the holders of the principal amounts outstanding under the Secured Revolving Credit Agreement and the Indenture (together with their respective successors and permitted assigns, the “Consenting Creditors” and each, a “Consenting Creditor”) is executed and delivered by ________________________________ (the “Joining Party”) as of ______________, 2016.  Each capitalized term used herein but not otherwise defined shall have the meaning set forth in the Agreement.

 

 

 

 

[Signature Page Follows]

 

IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be executed as of the date first written above.

 

[CONSENTING CREDITOR]

Revolving Credit Exposure under Secured Revolving Credit Agreement:  $_______________

Principal Amount of the 6.75% Senior Notes:  $_____________

Principal Amount of the 7.25% Senior Notes:  $_____________

 

Notice Address:

 

	Acknowledged:
	PARAGON OFFSHORE PLC
	By:
	Name:
	Title:

 

 

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PRESS RELEASE

PARAGON OFFSHORE COMMENCES PROCEEDINGS

TO RESTRUCTURE ITS BALANCE SHEET

HOUSTON, February 15, 2016 – Paragon Offshore plc (“Paragon” or the “company”) (OTC: PGNPF) today announced that the company and certain of its subsidiaries have elected to commence proceedings under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court in the District of Delaware.

 

As previously announced on February 12, 2016, Paragon entered into a Plan Support Agreement (the “PSA”) to support a restructuring of Paragon’s balance sheet.  As of February 15, 2016,the PSA has been signed by an ad hoc committee representing approximately 77% in the aggregate of holders (the “Bondholders”) of its senior unsecured notes and a group comprising approximately 96% of the amounts outstanding (“Revolver Lenders”) under Paragon’s Senior Secured Revolving Credit Agreement (the “Revolving Credit Agreement”).  An additional member of the Revolving Credit Agreement group signed the PSA subsequent to the February 12, 2016 announcement.  Approval of the transaction by the Revolver Lenders and the Bondholders will require that 2/3 in principal amount and 1/2 in number of those voting in each class to approve the transaction.

The company also announced that it has filed certain “first-day” motions with the court to facilitate operating in the normal course throughout the Chapter 11 process.  These motions will ensure that the company’s vendors, as well as employees, will continue to be paid.  Paragon expects to maintain sufficient liquidity throughout the restructuring process to maintain its business operations.

 

Randall D. Stilley, President and Chief Executive Officer of Paragon, said, “Paragon has acted proactively to strengthen the company’s balance sheet in this challenging environment.  We look forward to moving as quickly as possible through this process while maintaining our focus on delivering safe, reliable, and efficient operations as the industry’s High-Quality, Low-Cost drilling contractor. We are confident that Paragon will emerge as an even stronger company, better positioned for long-term growth and success.”

 

Additional Information

Details of the agreements can be found in the Current Report on Form 8-K that Paragon expects to file on Tuesday, February 16, 2016.  Additional information will be available on Paragon’s website at www.paragonoffshore.com or by calling Paragon’s Restructuring Hotline at 1-888-369-8935.

 

Court filings as well as other information related to Paragon’s restructuring are available through the company's claims agent, Kurtzman Carson Consultants, at http://www.kccllc.net/paragon or via phone call to 866-967-0491 (toll-free in North America) or 310-751-2691 (Outside North America.)

 

Weil, Gotshal & Manges LLP is serving as legal counsel to Paragon and Lazard is serving as financial advisor.

Forward-Looking Disclosure Statement

 

This document contains forward-looking statements. Statements regarding any agreements reached with the Bondholders and the Revolver Lenders, including the PSA, Paragon’s ability to implement the proposed transaction through Chapter 11, Paragon’s capital structure and competitive position following emergence from Chapter 11, the Chapter 11 process including timing and steps, and implications for customers, suppliers, shareholders, and employees, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to risks associated with the general nature of the oil and gas industry, actions by regulatory authorities, customers and other third parties, and other factors detailed in the “Risk Factors” section of Paragon's annual report on Form 10-K for the fiscal year ended December 31, 2014, Paragon’s most recently filed report on Form 10-Q, and in Paragon's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

 

About Paragon Offshore

 

Paragon is a global provider of offshore drilling rigs.  Paragon’s operated fleet includes 34 jackups, including two high specification heavy duty/harsh environment jackups, and six floaters (four drillships and two semisubmersibles). Paragon’s primary business is contracting its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world. Paragon’s principal executive offices are located in Houston, Texas. Paragon is a public limited company registered in England and Wales with company number 08814042 and registered office at 20-22 Bedford Row, London, WC1R 4JS, England. Additional information is available at www.paragonoffshore.com.

 

For additional information, contact:

 

For Investors	Lee M. Ahlstrom
& Media:	Senior Vice President – Investor Relations, Strategy and Planning +1.832.783.4040

 

 

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UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

 

PROPOSED DISCLOSURE STATEMENT FOR JOINT CHAPTER 11 PLAN OF

 

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¹ The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, as applicable, are: Paragon Offshore plc (6017); Paragon Offshore Finance Company (6632); Paragon International Finance Company (8126); Paragon Offshore Holdings US Inc. (1960); Paragon Offshore Drilling LLC (4541); Paragon FDR Holdings Ltd. (4731); Paragon Duchess Ltd.; Paragon Offshore (Luxembourg) S.à r.l. (5897); PGN Offshore Drilling (Malaysia) Sdn. Bhd. (9238); Paragon Offshore (Labuan) Pte. Ltd. (3505); Paragon Holding SCS 2 Ltd. (4108); Paragon Asset Company Ltd. (2832); Paragon Holding SCS 1 Ltd. (4004); Paragon Offshore Leasing (Luxembourg) S.à r.l. (5936); Paragon Drilling Services 7 LLC (7882); Paragon Offshore Leasing (Switzerland) GmbH (0669); Paragon Offshore do Brasil Ltda.; Paragon Asset (ME) Ltd. (8362); Paragon Asset (UK) Ltd.; Paragon Offshore International Ltd. (6103); Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited (0667); Paragon Holding NCS 2 S.à r.l. (5447); Paragon Leonard Jones LLC (8826); Paragon Offshore (Nederland) B.V.; and Paragon Offshore Contracting GmbH (2832).  The Debtors’ mailing address is 3151 Briarpark Drive, Suite 700, Houston, Texas 77042.

 

DISCLOSURE STATEMENT, DATED [APRIL 6], 2016

 

Solicitation of Votes on the

Plan of Reorganization of

 

PARAGON OFFSHORE PLC, ET AL.

 

from the holders of outstanding

 

REVOLVING CREDIT AGREEMENT CLAIMS

SENIOR NOTES CLAIMS

HOLDERS OF CLAIMS SHOULD NOT CONSTRUE THE CONTENTS OF THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL, OR TAX ADVICE AND SHOULD CONSULT WITH THEIR OWN ADVISORS BEFORE VOTING ON THE PLAN.

 

CERTAIN STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING STATEMENTS INCORPORATED BY REFERENCE, PROJECTED FINANCIAL INFORMATION, AND OTHER FORWARD-LOOKING STATEMENTS, ARE BASED ON ESTIMATES AND ASSUMPTIONS.  THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES.  FORWARD-LOOKING STATEMENTS ARE PROVIDED IN THIS DISCLOSURE STATEMENT PURSUANT TO THE SAFE HARBOR ESTABLISHED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND SHOULD BE EVALUATED IN THE CONTEXT OF THE ESTIMATES, ASSUMPTIONS, UNCERTAINTIES, AND RISKS DESCRIBED HEREIN.

 

FURTHER, READERS ARE CAUTIONED THAT ANY FORWARD-LOOKING STATEMENTS HEREIN ARE BASED ON ASSUMPTIONS THAT ARE BELIEVED TO BE REASONABLE, BUT ARE SUBJECT TO A WIDE RANGE OF RISKS IDENTIFIED IN THIS DISCLOSURE STATEMENT.  DUE TO THESE UNCERTAINTIES, READERS CANNOT BE ASSURED THAT ANY FORWARD-LOOKING STATEMENTS WILL PROVE TO BE CORRECT.  THE DEBTORS ARE UNDER NO OBLIGATION TO (AND EXPRESSLY DISCLAIM ANY OBLIGATION TO) UPDATE OR ALTER ANY FORWARD-LOOKING STATEMENTS WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE, UNLESS INSTRUCTED TO DO SO BY THE BANKRUPTCY COURT.

 

HOLDERS OF ALLOWED GENERAL UNSECURED CLAIMS WILL NOT BE IMPAIRED BY THE PLAN AND, AS A RESULT, THE RIGHT TO RECEIVE PAYMENT IN FULL ON ACCOUNT OF EXISTING OBLIGATIONS IS NOT ALTERED BY THE PLAN.  DURING THE CHAPTER 11 CASES, THE DEBTORS INTEND TO OPERATE THEIR BUSINESSES IN THE ORDINARY COURSE AND WILL SEEK AUTHORIZATION FROM THE BANKRUPTCY COURT TO MAKE PAYMENT IN FULL ON A TIMELY BASIS TO ALL TRADE CREDITORS, CUSTOMERS, AND EMPLOYEES OF ALL AMOUNTS DUE PRIOR TO AND DURING THE CHAPTER 11 CASES.

 

NO INDEPENDENT AUDITOR OR ACCOUNTANT HAS REVIEWED OR APPROVED THE FINANCIAL PROJECTIONS OR THE LIQUIDATION ANALYSIS HEREIN.  THE DEBTORS HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR ADVICE, OR TO MAKE ANY REPRESENTATION, IN CONNECTION WITH THE PLAN OR THIS DISCLOSURE STATEMENT.

 

THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED.  THE TERMS OF THE PLAN GOVERN IN THE EVENT OF ANY INCONSISTENCY WITH THE SUMMARIES IN THIS DISCLOSURE STATEMENT.

 

THE INFORMATION IN THIS DISCLOSURE STATEMENT IS BEING PROVIDED SOLELY FOR PURPOSES OF VOTING TO ACCEPT OR REJECT THE PLAN OR OBJECTING TO CONFIRMATION.  NOTHING IN THIS DISCLOSURE STATEMENT MAY BE USED BY ANY PARTY FOR ANY OTHER PURPOSE.  ALL EXHIBITS TO THE DISCLOSURE STATEMENT ARE INCORPORATED INTO AND ARE A PART OF THIS DISCLOSURE STATEMENT AS IF SET FORTH IN FULL HEREIN.

 

TABLE OF CONTENTS

 

 

I.

 

 

 

There are two primary creditor groups whose acceptances of the Plan are being solicited:

 

1.

Holders of the Revolving Credit Agreement Claims (Class 3); and

 

2.

Holders of the Senior Notes Claims (Class 5).

 

Below is a short summary of the treatment of various creditor groups under the Plan.  Greater detail on such treatment is provided later in this Disclosure Statement.

 

Class 3, the Revolving Credit Agreement Claims, will be Allowed as Secured Claims with respect to funded loans and the face amount of undrawn letters of credit in an aggregate principal amount of not less than [Seven Hundred and Ninety-Five Million and Six Hundred Thousand Dollars ($795,600,000)]³ (plus any unpaid accrued interest, letter of credit fees, other fees, and unpaid reasonable fees and expenses as of the Effective Date, in each case as required under the terms of the Revolving Credit Agreement and to the extent not already paid pursuant to the Adequate Protection Order).  On the Effective Date, or as soon as practicable thereafter (provided, that the Cash payments described in (ii) below will be distributed on the Effective Date), each holder of an Allowed Revolving Credit Agreement Claim will receive, in full satisfaction of and in exchange for such Allowed Secured Claim, its Pro Rata share of: (i) any accrued and unpaid interest from the Petition Date through the Effective Date as set forth in the Adequate Protection Order to the extent not previously paid pursuant to the Adequate Protection Order; (ii) One-Hundred and Sixty-Five Million Dollars ($165,000,000) in Cash and a corresponding permanent commitment reduction; and (iii) the remaining outstanding loans under the Revolving Credit Agreement converted to a term loan under the Amended and Restated Credit Agreement, which will also provide for the renewal of existing letters of credit and the issuance of new letters of credit on the terms and conditions set forth in the Amended and Restated Credit Agreement Term Sheet attached to the Plan as Exhibit A.

² Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Plan.

 

³ Exact number to be confirmed.

 

The legal, equitable, and contractual rights of Class 4, the holders of Allowed Secured Term Loan Claims, are unaltered by the Plan and such claims will be allowed in an amount of $644,950,651.04.  On the Effective Date, or as soon as practicable thereafter, the holders of Allowed Secured Term Loan Claims will have their Allowed Claims Reinstated, meaning that the Debtors will (i) cure all prepetition and postpetition defaults other than defaults relating to the insolvency or financial condition of an applicable Debtor or its status as a debtor under the Bankruptcy Code; (ii) reinstate the maturity date of the Claim; (iii) compensate the holder of such Claim for damages incurred as a result of its reasonable reliance on a contractual provision or such applicable law allowing the Claim’s acceleration; and (iv) not otherwise alter the legal, equitable or contractual rights to which the Claim entitles the holder thereof.

 

The rights of holders of General Unsecured Claims (Class 6) will be left unaltered by the Plan, and the Debtors will continue to pay or dispute each General Unsecured Claim in the ordinary course of business.

 

On the Effective Date, the holders of Parent Interests (Class 8) will retain their Parent Interests, subject to dilution on account of the Parent Ordinary Shares to be issued in accordance with the Plan.  After the issuance of the Parent Ordinary Shares, the Parent Interests will comprise in the aggregate sixty-five percent (65%) of the total outstanding ordinary shares of Reorganized Paragon without regard to the Management Incentive Plan Securities.

 

THE PLAN PROVIDES THAT HOLDERS OF IMPAIRED CLAIMS WHO VOTE IN FAVOR OF THE PLAN, WHO DO NOT SUBMIT A BALLOT TO ACCEPT OR REJECT THE PLAN, OR WHO REJECT THE PLAN BUT DO NOT OPT OUT OF THE RELEASE PROVISIONS OF THE PLAN ARE DEEMED TO HAVE GRANTED THE RELEASES THEREIN.

 

 

⁴ Exact number to be confirmed.

 

The following table summarizes, assuming an Effective Date of June 30, 2016, (i) the treatment of Claims and Interests under the Plan, (ii) which Classes are impaired by the Plan, (iii) which Classes are entitled to vote on the Plan, and (iv) the estimated recoveries for holders of Claims and Interests.  The table is qualified in its entirety by reference to the full text of the Plan.  For a more detailed summary of the terms and provisions of the Plan, see Section VI—Summary of the Plan below.  A detailed discussion of the analysis underlying the estimated recoveries, including the assumptions underlying such analysis, is set forth in the Valuation Analysis in Section VIII.

 

 

 

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·	Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 13, 2015

 

·	Form 10-Q for the quarterly period ended March 31, 2015, filed with the SEC on May 14, 2015

 

·	Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 13, 2015

 

·	Form 10-Q for the quarterly period ended September 30, 2015, filed with the SEC on November 9, 2015

 

·	Forms 8-K filed with the SEC on May 6, 2015, June 4, 2015, August 6, 2015, September 4, 2015, October 30, 2015, November 16, 2015, December 11, 2015, December 22, 2015, and February 12, 2016

 

II.

 

A.

The Debtors’ Business

 

 

For the nine months ended September 30, 2015, the unaudited and consolidated financial statements of the Paragon Group reflected total revenues of approximately $1,192,865,000 and a net loss of $976,380,000.  As of September 30, 2015, the Paragon Group’s unaudited and consolidated balance sheet reflected assets totaling approximately $2,474,627,000 and liabilities totaling approximately $2,962,630,000.  Each of the Debtors is either an issuer or guarantor of the Paragon Group’s debt.

 

B.

The Company’s Drilling Fleet and Drilling Contracts

 

The Company’s drilling fleet is comprised of 34 jackup rigs, four drillships, and two semisubmersibles.  Jackup rigs are mobile, self-elevating drilling platforms equipped with legs that can be lowered to the ocean floor.  Each of the Company’s jackups is cantilevered, meaning that the drilling platform may be extended out from the hull to perform drilling or workover operations over pre-existing platforms or structures.  Drillships are self-propelled vessels that maintain their position over a well through the use of a fixed mooring system or a computer-controlled dynamic positioning system.  Semisubmersibles are floating platforms that can be submerged to a predetermined depth so that a portion of the hull is below the water surface during drilling in order to improve stability.  Similar to drillships, semisubmersibles maintain their position over a well through the use of a fixed mooring system or a computer-controlled dynamic positioning system.

 

The Company operates for leading national, international, and independent oil and gas companies in active hydrocarbon producing markets, principally in Mexico, Brazil, the North Sea, Africa, the Middle East, and India.

 

1.

Mexico and the U.S. Gulf of Mexico

 

 

2.

Brazil

 

 

3.

The North Sea

 

 

4.

Africa

 

The Company operates three jackups in West Africa and an additional jackup in East Africa, where the Company’s customers are predominantly smaller, indigenous exploration and production companies.  Currently, two of the Company’s jackups in West Africa are cold-stacked.  Additionally, the Company has one dynamically positioned drillship in Cape Town, South Africa, where it is expected to be cold-stacked.

 

5.

The Middle East

 

 

6.

India

 

The Company operates three jackups via modified bareboat charters in India.  Through this structure, the Company charters these jackups to a local operating company, which then contracts these jackups to the Oil and Natural Gas Corporation, the Indian state-owned oil company.

 

7.

Southeast Asia

 

The Company has one jackup cold-stacked in Malaysia.

 

C.

The Debtors’ History and Organizational Structure

 

1.

Spin-Off from Noble Corporation

 

 

 

In the fourth quarter of 2014, months after the Spin-Off, the Debtors concluded that a triggering event had occurred that required them to perform an impairment analysis of their fleet.  As a result of this analysis, Paragon Parent determined that three of its rigs were impaired.  Paragon Parent also decided to scrap four other vessels at this time.  Each of these rigs was acquired from Noble in connection with the Spin-Off.  Paragon Parent’s estimate of fair value of these drilling rigs resulted in the recognition of an impairment loss of $1.1 billion for the year ended December 31, 2014.

 

2.

Prospector Acquisition

 

On November 17, 2014, Paragon Parent acquired 89.3 million, or 94.4%, of the outstanding shares of Prospector, an offshore drilling company organized in Luxembourg and traded on the Oslo Axess, from certain shareholders and in open market purchases for approximately $190 million in cash.  In December 2014, Paragon Parent purchased an additional 4.1 million shares of Prospector for approximately $10 million in cash, increasing its ownership to approximately 93.4 million shares, or 98.7%.  On January 22, 2015, Paragon Parent settled a mandatory tender offer for additional outstanding shares, increasing its ownership to approximately 99.6% of the outstanding shares of Prospector.  Finally, on February 23, 2015, Paragon Parent acquired all remaining issued and outstanding shares in Prospector.  In the aggregate, Paragon Parent spent approximately $202 million to acquire 100% of Prospector and funded the purchase of these shares using proceeds from the Revolving Credit Facility and cash on hand.  During the first quarter of 2015, Paragon Parent repurchased $100 million par value of Prospector’s 2019 Second Lien Callable Bonds at a price of 101% of par, plus accrued interest, pursuant to change of control provisions under the bonds.  Paragon Parent also repaid the principal balance outstanding under Prospector’s 2018 Senior Secured Credit Facility, which totaled approximately $261 million (including accrued interest).  Paragon Parent made these payments through the use of cash on hand and borrowings under the Revolving Credit Facility.

 

The Prospector acquisition expanded and enhanced Paragon’s global fleet by adding two high specification jackups contracted to Total E&P U.K. Limited and Elf Exploration U.K. Limited for use in the United Kingdom region of the North Sea.  Moreover, Paragon acquired subsidiaries of Prospector that contracted for the construction of three newbuild high specification jackup rigs in China by Shanghai Waigaoqiao Ship Co. Ltd. (“SWS”).  The three rigs are currently scheduled for delivery in the first and fourth quarters of 2016 and the first quarter of 2017, respectively.  The Company, however, remains in negotiations with SWS regarding potential delivery extensions and does not expect to accept delivery of any rig without both a suitable contract and a financing arrangement.  Each newbuild is being built pursuant to a contract between one of Prospector’s subsidiaries and SWS, without a Paragon Parent or Prospector parent company guarantee or other direct recourse to any other subsidiary of Paragon Parent other than the applicable Prospector subsidiary.

On July 24, 2015, the Company executed a combined $300 million transaction with subsidiaries of SinoEnergy (collectively, the “Lessors”) relating to the two high specification jackup units acquired in the Prospector acquisition.  The Company sold these rigs to the Lessors and immediately leased them from Lessors for a period of five years with a repurchase obligation at the end of the lease term pursuant to a lease agreement for each unit (the “Lease Agreements”).  The Lease Agreements provide for an event of default if Paragon Parent files a case under chapter 11 of the Bankruptcy Code.  Due to the filing of its Chapter 11 Cases, Paragon Parent negotiated a forbearance under the Lease Agreements through March 15, 2016.  If the forbearance expires, or the Company is not able to obtain a permanent waiver of the event of default, the Prospector entities will explore further alternatives.  The Company continues to discuss this matter with the Lessors.

3.

Corporate Structure

 

 

D.

Directors and Officers

 

Paragon Parent’s current board of directors is composed of J. Robinson West, Chairman, Anthony R. Chase, Thomas L. Kelly II, John P. Reddy, Dean E. Taylor, William L. Transier, David W. Wehlmann, and Randall D. Stilley.

 

Paragon Parent’s current senior management team is composed of Randall D. Stilley, President and Chief Executive Officer, Steven A. Manz, Senior Vice President and Chief Financial Officer, William C. “Charlie” Yester, Senior Vice President—Operations, Lee M. Ahlstrom, Senior Vice President—Investor Relations, Strategy and Planning, Andrew W. Tietz, Senior Vice President—Marketing and Contracts, Anirudha “Sunil” Pangarkar, Senior Vice President—Special Projects, Supply Chain and Maintenance, Todd D. Strickler, Vice President, General Counsel and Corporate Secretary, Ale Veltmann, Vice President—Chief Accounting Officer, and Julie A. Ferro, Vice President—Human Resources.

 

The composition of the board of directors of each Reorganized Debtor will be disclosed prior to the entry of the order confirming the Plan in accordance with 11 U.S.C. § 1129(a)(5).

 

E.

Regulation of the Debtors’ Business

 

The Debtors’ operations are conducted in the United States and foreign jurisdictions and are subject to governmental laws, regulations, and treaties in the countries in which they operate.  The laws, regulations, and treaties that impact the Debtors’ operations include those relating to the operation of drilling units, environmental protection, health and safety, various restrictions on oil and natural gas exploration and development, taxation of the Debtors’ earnings and the earnings of Debtors’ expatriate personnel, immigration restrictions for expatriate personnel, minimum requirements for the use of local employees and suppliers, duties and restrictions on the importation and exportation of drilling units and other equipment, local currency requirements, and restrictions on repatriated cash.

 

F.

The Debtors’ Capital Structure

 

1.

Equity Ownership

 

 

2.

Prepetition Indebtedness

 

The Debtors’ significant prepetition indebtedness includes secured financing obligations in the amount of approximately [$1,440,650,651] and unsecured financing obligations in the amount of approximately $983,582,000.  The Debtors’ secured and unsecured financing obligations are described in greater detail below.  Such description is for informational purposes only and is qualified in its entirety by reference to the documents setting forth the specific terms of such obligations and their respective related agreements.  As noted above, substantially all of the Paragon Group’s debt is issued or guaranteed by the Debtors.

 

(a)

Revolving Credit Facility

 

 

On September 3, 2015, Paragon Parent borrowed approximately $332 million under the Revolving Credit Agreement, which represented substantially all of the remaining undrawn amount that was available to Paragon Parent under the Revolving Credit Facility at that time.  On December 23, 2015, Paragon Parent borrowed an additional $11.5 million under the Revolving Credit Facility.  As of the date hereof, the aggregate principal amount outstanding under the Revolving Credit Agreement is $708.5 million in unpaid principal, plus interest, fees, and other expenses, in addition to approximately $[87.2] million of letters of credit.  The Loans bear interest, at Paragon Parent’s option, at either (i) an adjusted LIBOR plus an applicable margin ranging between 1.50% to 2.50%, depending on the Leverage Ratio (as defined in the Revolving Credit Agreement), or (ii) a base rate plus an applicable margin ranging between 0.50% to 1.50%, depending on the Leverage Ratio (as defined in the Revolving Credit Agreement).

 

(b)

Secured Term Loan

 

 

As of the date hereof, the aggregate principal amount outstanding under the Secured Term Loan Agreement is approximately $641,875,000 in unpaid principal, plus interest, fees, and other expenses.  The Secured Term Loan bears interest at LIBOR plus 2.75%, subject to a minimum LIBOR rate of 1% or a base rate plus 1.75%, at Paragon Offshore Finance Company’s option.

 

(c)

6.75% and 7.25% Senior Notes

 

 

(d)

Guaranty and Collateral Agreement

 

 

G.

Significant Prepetition Contracts and Leases

 

As more fully described in this Disclosure Statement, the Paragon Group’s most significant contracts are its revenue contracts with its customers, which include leading national, international, and independent oil and gas companies.  The Company contracts its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world.  These contracts may vary in duration, as the Company contracts its services for a specific period of time or a period necessary to drill a defined number wells.  The Company also has contracts with numerous vendors, some of which are key to its business, relating to the provision of equipment, personnel, or services necessary to support its business.  During its Chapter 11 Cases, the Company plans to operate in the ordinary course and to continue its relationships with its contract counterparties and vendors without interruption.

 

In connection with the Spin-Off, Noble, Paragon Parent, and certain of their respective subsidiaries entered into the following agreements (collectively, the “Separation Agreements”) ⁷:

 

·

that certain Master Separation Agreement (the “Master Separation Agreement”), dated as of July 31, 2014, by and between Noble and Paragon Parent, which details the actions necessary to effectuate the Spin-Off;

 

·

that certain Tax Sharing Agreement (the “Tax Sharing Agreement”), dated as of July 31, 2014, by and between Noble and Paragon Parent, which generally requires Paragon Parent to indemnify Noble for all taxes attributable to the standard specification drilling business, and in turn requires Noble to indemnify Paragon Parent against all taxes attributable to the high specification drilling business;

 

·

that certain Employee Matters Agreement (the “Employee Matters Agreement”), dated as of July 31, 2014, by and between Noble and Paragon Parent, under which Paragon Parent assumed certain Noble employment plans and created certain new plans to provide employee benefits;

⁷ Descriptions of the Agreements provided herein are for the convenience of the Court and parties in interest.  To the extent there are any ambiguities or inconsistencies between the summaries and the corresponding document, the terms of the latter shall govern in all respects.

 

·

that certain Transition Services Agreement (“Transition Services Agreement”), dated as of July 31, 2014, by and between Noble and Paragon Parent, which provides terms and schedules detailing the services Noble and Paragon Parent were obligated to perform during the transitional period lasting from the date of the Spin-Off through December 31, 2015; and

 

·

that certain Transition Services Agreement (Brazil) (the “Transition Services Agreement (Brazil)”), dated as of July 31, 2014, entered into among Paragon Offshore do Brasil Limitada, Paragon Parent, Noble, Noble Dave Beard Limited, and Noble Drilling (Nederland) II B.V., which details additional services Paragon Parent is obligated to provide to certain Noble rigs with operations located offshore Brazil.

 

Each of the Agreements is governed by New York law.

 

In addition to their contracts in the ordinary course of business and the Separation Agreements, the Debtors have an office lease in Houston, Texas, where their corporate headquarters are located.  The Debtors also own and lease administrative offices, marketing offices, and sites used primarily for storage, maintenance, and repairs for drilling rigs and equipment in various locations worldwide.

III.

 

A.

Collapse in Oil Prices

 

Demand for drilling services depends on, among other things, commodity prices, actual or potential changes in these prices, and the level of activity in offshore oil and gas exploration and development and production markets (which may be significantly affected by the prices of these commodities).  As a result, the offshore contract drilling industry is a cyclical business, with periods of high demand, short rig supply, and high dayrates when the price of oil is high, followed by periods of lower demand, excess rig supply, and low dayrates when the price of oil is low.  Additionally, the offshore drilling business is highly competitive.  Contracts are traditionally awarded on a competitive bid basis and, in times of low oil prices, offshore drilling companies may be forced to idle, stack, or scrap rigs, adversely affecting their revenues and profitability.

 

In the summer of 2014, Brent crude oil prices – a key factor in determining customer activity levels – began to decline, dropping from roughly $115 per barrel in June 2014 to approximately $60 per barrel by December of the same year.  As a result of this swift and substantial decline in oil prices, many of the Debtors’ customers (which include national, international, and independent oil and gas companies) reduced their exploration and development capital expenditures by as much as 20 to 25% in 2015.  Oil prices continued to decline in 2015, closing at $37.28 per barrel on December 31, 2015 – an additional 35% decrease over the course of a volatile year.  This reduced demand has led to an oversupply of rigs competing for limited tendering activity.  The oversupply of rigs has been compounded by a significant expansion of supply of (mostly non-contracted) newbuild rigs in recent years.  As of February 4, 2016, Brent crude oil prices have declined by an additional approximately 8%.  Several exploration and production companies have made announcements that they plan to reduce capital spending by 20% or more in 2016 as a result of expectations of continued low commodity prices.  The Debtors expect that further reductions in activity will follow in 2016, as capital spending has historically been an indicator of drilling activity.

 

Because of the amount of debt the Debtors incurred in the connection with the Spin-Off and the nature of the assets acquired, the Debtors were not equipped to absorb the ongoing and precipitous decline in oil and gas prices and the corresponding decline in demand for their services.  Although the Debtors do not face any maturities on their secured debt until 2019, the severity and duration of the market downturn has increased the risk that existing customer contracts, some of which are due to expire in the near term, will not be renewed or will be renewed at materially reduced prices.  The Debtors are also suffering the effects of termination of longer-term contracts, such as the Pemex Contracts and Petrobras Contracts (as described below).

 

B.

Contract Terminations and Renegotiations

 

 

 

Furthermore, as exploration and production companies seek to reduce expenses, they have approached the Company and other drilling companies to seek reductions in current contract dayrates.  Referred to as “blend and extend” discussions, these conversations are sometimes mutually beneficial – for example, if a drilling contractor agrees to lower its contract dayrate in exchange for an exploration and production company’s agreement to add time to the contract term.  In some cases, such as those the Company faced in Mexico, drilling contractors may have no choice but to lower their dayrates or face termination.  The Company has been (and may continue to be) engaged in similar discussions, which could have negative near-term impacts on revenues despite potentially providing longer-term benefits.

 

C.

Deleveraging Initiatives

 

Due to the continuing decline in Brent crude oil prices and corresponding decline in demand for offshore drilling services, Paragon Parent does not expect to remain in compliance with the leverage ratio covenant under the Revolving Credit Facility.  Accordingly, under the direction of an independent committee of Paragon Parent’s Board of Directors, the Debtors have retained restructuring advisors to explore long-term solutions to improve Paragon Parent’s overall balance sheet strength and to engage the company’s lenders and noteholders with the intent of maximizing value for the company’s shareholders and other stakeholders.  On February 12, 2016, the Debtors entered into the Plan Support Agreement with the Consenting Revolver Lenders and the Consenting Noteholders regarding the terms of the Restructuring.

 

Under the Plan Support Agreement, each of the Consenting Revolver Lenders and Consenting Noteholders agreed to, among other things:  (i) vote any claim it holds against the Debtors to accept the Plan and not (a) change or withdraw (or cause to be changed or withdrawn) its vote to accept the Plan, (b) object to, delay, impede, or take any other action to interfere with acceptance or implementation of the Plan, or (c) directly or indirectly solicit, encourage, propose, file, support, participate in the formulation of, or vote for, any restructuring, sale of assets, merger, workout or plan of reorganization for any of the Debtors other than the Plan; (ii) forbear from exercising any rights or remedies under the Senior Notes Indenture with respect to its notes resulting from certain actual or potential defaults or events of default specified therein; and (iii) subject to certain exceptions, conditions any transfer of its claims against the Debtors to the transferee thereof being an existing Consenting Creditor or becoming party to the Plan Support Agreement.  Notwithstanding anything in the Plan Support Agreement to the contrary, the Consenting Revolver Lenders preserved all rights to object to any plan of reorganization that seeks to cram down their claims arising under the Revolving Credit Agreement, and any ballot previously submitted in favor of such a plan of reorganization by the Consenting Revolver Lenders will be automatically withdrawn and deemed null and void and each Consenting Revolver Lender may terminate the Plan Support Agreement as to itself if a cram down of its claims arising under the Secured Revolving Credit Agreement is pursued by the Company.

 

 

IV.

 

 

A.

Commencement of Chapter 11 Cases and First Day Motions

 

The Debtors intend to continue to operate their business in the ordinary course during the pendency of the Chapter 11 Cases as they had prior to the Petition Date.  To facilitate the prompt and efficient implementation of the Plan through the Chapter 11 Cases, the Debtors intend to seek to have the Chapter 11 Cases assigned to the same bankruptcy judge and administered jointly.  The Debtors also plan to file various motions seeking relief from the Bankruptcy Court which, if granted, will ensure a seamless transition between the Debtors’ prepetition and postpetition business operations, facilitate a smooth reorganization through the Chapter 11 Cases, and minimize any disruptions to the Debtors’ operations.  The following is a brief overview of the relief the Debtors intend to seek on the Petition Date to maintain their operations in the ordinary course.

 

1.

Cash Management System

 

The Debtors maintain a centralized cash management system designed to receive, monitor, aggregate, and distribute cash among the Paragon Group.  On the Petition Date, the Debtors intend to seek authority from the Bankruptcy Court to continue the use of their existing cash management system, bank accounts, and related business forms, as well as to continue their intercompany arrangements with non-Debtors to avoid a disruption in the Debtors’ operations and facilitate the efficient administration of the Chapter 11 Cases.

 

2.

Use of Cash Collateral

 

To address their working capital needs and fund their reorganization efforts, the Debtors require the use of cash subject to liens (the “Cash Collateral”) granted in favor of the holders of the Revolving Credit Agreement Claims and the Secured Term Loan Claims pursuant to the Guaranty and Collateral Agreement.  On the Petition Date, the Debtors intend to seek authority from the Bankruptcy Court to continue to use the Cash Collateral in the ordinary course of business subject to certain restrictions.  In exchange for the continued use of the Cash Collateral, the Debtors intend to provide the holders of the Revolving Credit Agreement Claims and the Secured Term Loan Claims with, among other things, first priority replacement liens on the Debtors’ unencumbered property and junior replacement liens on certain of the Debtors’ encumbered property as adequate protection for any diminution in value of their respective interests in the collateral securing the Loans under Revolving Credit Agreement and the Secured Term Loan.  In addition, the Debtors’ adequate protection obligations shall constitute superpriority claims under section 507(b) of the Bankruptcy Code.

3.

Taxes

 

Pursuant to the Plan, the Debtors intend to pay all taxes and regulatory obligations in full.  To minimize any disruption to the Debtors’ operations and ensure the efficient administration of the Chapter 11 Cases, on the Petition Date, the Debtors intend to seek authority from the Bankruptcy Court to pay all taxes, fees, and similar charges and assessments that arose prepetition, including any such amounts that become due and owing postpetition, to the appropriate taxing, regulatory, or other governmental authority in the ordinary course of the Debtors’ business.

 

4.

Utilities

 

In the ordinary course of business, the Debtors incur certain expenses related to essential utility services, such as electricity, gas, water, satellite, and telecommunications.  Accordingly, on the Petition Date, the Debtors intend to seek (i) authority from the Bankruptcy Court to continue payments to such utility providers in the ordinary course and (ii) approval of procedures to provide such utility providers with adequate assurance that the Debtors will continue to honor their obligations in the ordinary course.

 

5.

Insurance

 

 

6.

Employee Wages and Benefits

 

The Debtors’ business, including the operation of the Debtors’ drilling assets, is labor intensive and relies upon thousands of employees, crew members, and contractors worldwide.  Additionally, many of the Debtors’ employees are employed by non-Debtor affiliates who are dependent on funding from the Debtors to compensate these employees.  To minimize the uncertainty and potential distractions associated with the Chapter 11 Cases and the potential disruption of the Debtors’ operations resulting therefrom, on the Petition Date, the Debtors intend to seek authority from the Bankruptcy Court to continue to honor their obligations to their workforce in the ordinary course of business, including (i) the payment of pre- and postpetition wages, salaries, reimbursable employee expenses, and accrued and unpaid employee benefits and (ii) the continuation of the Debtors’ benefit programs and policies.

 

7.

Trade Payables

 

B.

Other Procedural Motions and Retention of Professionals

 

The Debtors intend to file several other motions that are common to chapter 11 proceedings of similar size and complexity as the Chapter 11 Cases, including applications to retain various professionals to assist the Debtors in the Chapter 11 Cases.

 

C.

Timetable for the Chapter 11 Cases

 

In accordance with the Plan Support Agreement, the Debtors are obligated to proceed with the implementation of the Plan through the Chapter 11 Cases.  Among the milestones contained in the Plan Support Agreement are the requirement that the Bankruptcy Court enter the order approving the Disclosure Statement and the solicitation procedures within 75 days after the Petition Date, enter an order confirming the Plan within 185 days after the Petition Date, and that the Plan must be consummated no later than 230 days after the Petition Date.  Although the Debtors will request that the Bankruptcy Court approve the timetable set forth in the Plan Support Agreement, there can be no assurance that the Bankruptcy Court will grant such relief.  Achieving the various milestones under the Plan Support Agreement is crucial to reorganizing the Debtors successfully.

 

V.

 

A.

Litigation

 

1.

Pending Litigation

 

The Company is involved in a number of lawsuits and matters which have arisen in the ordinary course of business.  The Company does not expect any liability it may have in these matters to have a material adverse effect on its consolidated financial statements.  The Company, however, cannot predict with certainty the outcome or effect of pending or threatened litigation or legal proceedings, and the eventual outcome could materially differ from its current estimates.

 

B.

Tax Disputes

 

In connection with the Spin-Off, Paragon Parent and Noble entered into the Tax Sharing Agreement, under which Paragon Parent is generally responsible for all taxes attributable to its business, whether accruing before, on, or after the date of the Spin-Off.  Noble is generally responsible for any taxes arising from the Spin-Off (and certain related transactions) that are imposed on Paragon Parent, Noble, or any of Noble’s subsidiaries, with the exception that Paragon Parent is responsible for any such taxes resulting from certain actions or failures to act by Paragon Parent after the effective date of the Tax Sharing Agreement.

As of December 31, 2015, tax audit claims in Mexico relating to the tax years 2005 through 2008 totaled approximately $200 million, with audit claims for 2009 and 2010 yet to be received.  Paragon Parent has either contested or intends to contest each of these assessments, and cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions.  The Debtors have no surety bonds or letters of credit associated with tax audit claims outstanding as of September 30, 2015.

In addition to the tax audit claims, in January 2015, a subsidiary of Noble received an unfavorable ruling from the Mexican Supreme Court on a tax depreciation position claimed in periods prior to the Spin-Off.  Although the ruling does not constitute mandatory jurisprudence in Mexico, and the amount of the final liability is generally only a fraction of that initially assessed, the ruling creates potential indemnification exposure for Paragon Parent under the Tax Sharing Agreement.  Noble is the primary obligor to the Mexican tax authorities.

Prior to the Petition Date, Paragon Parent negotiated a settlement agreement by which it will release Noble with respect to certain claims, described further in Section VI.D.7, in exchange for Noble’s agreement to provide direct bonding necessary for Paragon Parent to challenge the Mexican tax assessments.  The terms of such agreement are set forth in the Noble Term Sheet, attached to the Plan as Exhibit B.  Pursuant to the Plan Support Agreement, Paragon Parent has agreed to enter into a definitive settlement agreement with Noble that will be consistent with the Noble Term Sheet.

The Noble Term Sheet contemplates that Paragon Parent will fully and unconditionally release Noble and its affiliates and subsidiaries and their respective officers and directors (collectively, the “Noble Entities”) from any and all claims, obligations, rights, suits, damages, causes of action, remedies and liabilities whatsoever arising under, relating to or in connection with the Spin-Off, whether known or unknown, foreseen or unforeseen, arising on or before the Effective Date; provided, however that the Noble Entities will not be released from their respective obligations under the Separation Agreements.  In exchange, Noble will provide direct bonding, in the form of cash, a letter of credit, or any other assurance that satisfies any bonding or surety provider selected by the Noble Entities to issue the bond, to satisfy certain bonding requirements necessary to challenge assessments of applicable income and value-added taxes imposed by Mexican tax authorities relating to the Paragon Group’s business for tax years 2005 through and including 2010.  The bonding will also cover any customs taxes for any period or portion thereof prior to the Spin-Off.  Upon final resolution of any assessment for this tax liability (or any portion thereof), Noble will pay 100% of the ultimate resolved amount of such tax for Noble Entities, and 50% of the ultimate resolved amount of such tax for the Paragon Group (except for customs taxes, for which Noble and Paragon Parent will each will pay 50% of the ultimate resolved amount).

 

VI.

 

 

A.

Administrative Expense and Priority Claims

 

1.

Treatment of Administrative Expense Claims

 

Except to the extent that a holder of an Allowed Administrative Expense Claim other than a Fee Claim agrees to a different treatment, on the Effective Date or as soon thereafter as is reasonably practicable, the holder of such Allowed Administrative Expense Claim will receive, on account of such Allowed Claim, Cash in an amount equal to the Allowed amount of such Claim; provided, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors, as Debtors in Possession, will be paid by the Debtors or the Reorganized Debtors, as applicable, in the ordinary course of business, consistent with past practice and in accordance with the terms and subject to the conditions of any orders or agreements governing, instruments evidencing, or other documents establishing, such liabilities.

 

2.

Treatment of Fee Claims

 

All Professional Persons seeking awards by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under sections 327, 328, 330, 331, 503(b)(2), 503(b)(3), 503(b)(4), 503(b)(5), 503(b)(6) or 1103 of the Bankruptcy Code will (a) file, on or before the date that is sixty (60) days after the Confirmation Date, their respective applications for final allowances of compensation for services rendered and reimbursement of expenses incurred and (b) be paid in full, in Cash, in such amounts as are Allowed by the Bankruptcy Court in accordance with the order(s) relating to or allowing any such Fee Claim.  The Debtors are authorized to pay compensation for professional services rendered and reimbursement of expenses incurred after the Confirmation Date in the ordinary course and without the need for Bankruptcy Court approval.  For the avoidance of doubt, this treatment will not be applicable to any Restructuring Expenses, which will be paid in full in Cash in accordance with the terms of the applicable engagement letters or other applicable contractual arrangements.

 

3.

Treatment of Priority Tax Claims

 

 

B.

Classification of Claims and Interests

 

1.

Classification in General

 

 

2.

Formation of Debtor Groups for Convenience Only

 

The Plan groups the Debtors together solely for the purpose of describing treatment under the Plan, confirmation of the Plan, and making Plan Distributions in respect of Claims against and Interests in the Debtors under the Plan.  Such groupings will not unfairly prejudice or harm any creditor because they will not affect any Debtor’s status as a separate legal Entity, change the organizational structure of the Debtors’ business enterprise, constitute a change of control of any Debtor for any purpose, cause a merger of consolidation of any legal Entities, or cause the transfer of any assets, and, except as otherwise provided by or permitted under the Plan, all Debtors will continue to exist as separate legal Entities.

 

3.

Summary of Classification of Claims and Interests

 

 

4.

Separate Classification of Other Secured Claims.

 

Although all Other Secured Claims have been placed in one Class for purposes of nomenclature within the Plan, each Other Secured Claim, to the extent secured by a Lien on Collateral different from the Collateral securing another Other Secured Claim, will be treated as being in a separate sub-Class for the purposes of receiving Plan Distributions.

 

5.

Elimination of Vacant Classes.

 

Any Class that, as of the commencement of the Confirmation Hearing, does not have at least one holder of a Claim or Interest that is Allowed in an amount greater than zero for voting purposes will be considered vacant, deemed eliminated from the Plan for purposes of voting to accept or reject the Plan, and disregarded for purposes of determining whether the Plan satisfies section 1129(a)(8) of the Bankruptcy Code with respect to such Class.

 

6.

Voting; Presumptions; Solicitation.

 

 

 

7.

Cramdown.

 

If any Class of Claims entitled to vote on the Plan does not vote to accept the Plan, the Debtors may (a) seek confirmation of the Plan under section 1129(b) of the Bankruptcy Code or (b) amend or modify the Plan in accordance with the terms hereof and the Bankruptcy Code.

 

8.

No Waiver.

 

Nothing contained in the Plan will be construed to waive a Debtor’s or other Person’s right to object on any basis to any Claim.

 

C.

Treatment of Claims and Interests

 

1.

Class 1: Priority Non-Tax Claims.

 

The legal, equitable, and contractual rights of the holders of Allowed Priority Non-Tax Claims are unaltered by the Plan.  Except to the extent that a holder of an Allowed Priority Non-Tax Claim agrees to different treatment, on the later of the Effective Date and the date that is ten (10) Business Days after the date such Priority Non-Tax Claim becomes an Allowed Claim, or as soon thereafter as is reasonably practicable, each holder of an Allowed Priority Non-Tax Claim will receive, in full satisfaction of and in exchange for such Allowed Claim, at the option of the Reorganized Debtors: (i) Cash in an amount equal to the Allowed amount of such Claim or (ii) other treatment consistent with the provisions of section 1129(a)(9) of the Bankruptcy Code.

 

2.

Class 2: Other Secured Claims.

 

The legal, equitable, and contractual rights of the holders of Allowed Other Secured Claims are unaltered by the Plan.  Except to the extent that a holder of an Allowed Other Secured Claim agrees to different treatment, on the later of the Effective Date and the date that is ten (10) Business Days after the date such Other Secured Claim becomes an Allowed Claim, or as soon thereafter as is reasonably practicable, each holder of an Allowed Other Secured Claim will receive, in full satisfaction of and in exchange for such Allowed Claim, at the option of the Reorganized Debtors: (i) Cash in an amount equal to the Allowed amount of such Claim, (ii) Reinstatement or such other treatment sufficient to render such holder’s Allowed Other Secured Claim Unimpaired pursuant to section 1124 of the Bankruptcy Code, or (iii) return of the applicable Collateral in satisfaction of the Allowed amount of such Other Secured Claim.

 

3.

Class 3: Revolving Credit Agreement Claims

 

 

4.

Class 4: Secured Term Loan Claims

 

The legal, equitable, and contractual rights of the holders of Allowed Secured Term Loan Claims are unaltered by the Plan.  The Secured Term Loan Claims will be Allowed in an amount of $644,950,651.04.  On the Effective Date, or as soon as practicable thereafter, the holders of Allowed Secured Term Loan Claims will have their Allowed Claims Reinstated.

5.

Class 5: Senior Notes Claims

 

---

⁸ Exact number to be confirmed.

 

⁹ Exact number to be confirmed.

 

6.

Class 6: General Unsecured Claims

 

The legal, equitable, and contractual rights of the holders of General Unsecured Claims are unaltered by the Plan.  Except to the extent that a holder of a General Unsecured Claim agrees to different treatment, on and after the Effective Date, the Debtors or Reorganized Debtors, as applicable, will continue to pay or dispute each General Unsecured Claim in the ordinary course of business as if the Chapter 11 Cases had never been commenced.

 

7.

Class 7: Intercompany Claims

 

On or after the Effective Date, all Intercompany Claims will be paid, adjusted, continued, settled, reinstated, discharged, or eliminated, in each case to the extent determined to be appropriate by the Debtors or Reorganized Debtors, as applicable, in their sole discretion.  All Intercompany Claims between any Debtor and a nondebtor affiliate will be Unimpaired under the Plan.

 

8.

Class 8: Parent Interests

 

On the Effective Date, the holders of Parent Interests will retain their Parent Interests, subject to dilution on account of the Parent Ordinary Shares to be issued in accordance with the Plan.  After the issuance of the Parent Ordinary Shares, the Parent Interests will comprise in the aggregate sixty-five percent (65%) of the total outstanding ordinary shares of Reorganized Paragon without regard to the Management Incentive Plan Securities.

 

9.

Class 9: Intercompany Interests

 

On the Effective Date and without the need for any further corporate action or approval of any board of directors, management, or shareholders of any Debtor or Reorganized Debtor, as applicable, all Intercompany Interests held by Paragon Parent or a direct or indirect subsidiary of Paragon Parent will be unaffected by the Plan and continue in place following the Effective Date.

 

D.

Means for Implementation

 

1.

Continued Corporate Existence

 

 

 

2.

Amended and Restated Credit Agreement and Parent Ordinary Shares.

 

On the Effective Date, the Reorganized Debtors will be authorized to issue or cause to be issued all plan-related securities and documents, including without limitation the Amended and Restated Credit Agreement and the Parent Ordinary Shares, for distribution in accordance with the terms of this Plan and any corporate resolutions.

 

On the Effective Date, (a) upon the granting of liens in accordance with the Amended and Restated Credit Agreement, the lenders thereunder will have valid, binding and enforceable liens on the collateral specified in the Amended and Restated Credit Agreement and related guarantee and collateral documentation; and (b) upon the granting of guarantees, mortgages, pledges, liens and other security interests in accordance with the Amended and Restated Credit Agreement, the guarantees, mortgages, pledges, liens and other security interests granted to secure the obligations arising under the Amended and Restated Credit Agreement will be granted in good faith as an inducement to the lenders thereunder to convert to term loans and extend credit thereunder and will be deemed not to constitute a fraudulent conveyance or fraudulent transfer, will not otherwise be subject to avoidance, and the priorities of such liens and security interests will be as set forth in the Amended and Restated Credit Agreement and related guarantee and collateral documentation.

 

3.

Cancellation of Certain Existing Agreements

 

 

4.

Release of Liens.

 

Upon the full payment or other satisfaction of an Allowed Other Secured Claim, or promptly thereafter, the holder of such Allowed Other Secured Claim will deliver to the Debtors or Reorganized Debtors, as applicable, any Collateral or other property of a Debtor held by such holder, together with any termination statements, instruments of satisfaction, or releases of all security interests with respect to its Allowed Other Secured Claim that may be reasonably required to terminate any related financing statements, mortgages, mechanics’ or other statutory liens, or lis pendens, or similar interests or documents.

 

5.

Officers and Boards of Directors

 

 

 

6.

Management Incentive Plan

 

 

7.

Intercompany Interests; Corporate Reorganization

 

On the Effective Date and without the need for any further corporate action or approval of any board of directors, management, or shareholders of any Debtor or Reorganized Debtor, as applicable, all Intercompany Interests held by Paragon Parent or a direct or indirect subsidiary of Paragon Parent will be unaffected by the Plan and continue in place following the Effective Date.

8.

Restructuring Transactions

 

On the Effective Date or as soon as reasonably practicable thereafter, the Debtors or Reorganized Debtors, as applicable, may take all actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary to effectuate one or more transactions pursuant to section 1123(a)(5)(D) of the Bankruptcy Code to occur on the Effective Date or as soon as reasonably practicable thereafter, that may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary to effectuate the Plan, including (a) the consummation of the transactions provided for under or contemplated by the Plan Support Agreement; (b) the execution and delivery of appropriate agreements or other documents containing terms that are consistent with or reasonably necessary to implement the terms of the Plan and the Plan Support Agreement and that satisfy the requirements of applicable law; (c) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any property, right, liability, duty, or obligation on terms consistent with the terms of the Plan and the Plan Support Agreements; and (d) all other actions that the Debtors or Reorganized Debtors, as applicable, determine are necessary or appropriate (collectively, the “Restructuring Transactions”) under and in connection with the Plan.

¹⁰ The Plan Supplement will be in form and substance reasonably satisfactory to the Required Plan Support Parties.

 

9.

Settlement of Claims and Controversies

 

 

 

10.

Separability

 

Notwithstanding the combination of separate plans of reorganization for the Debtors set forth in the Plan for purposes of economy and efficiency, the Plan constitutes a separate chapter 11 plan for each Debtor.  Accordingly, if the Bankruptcy Court does not confirm the Plan with respect to one or more Debtors, it may still confirm the Plan with respect to any other Debtor that satisfies the confirmation requirements of section 1129 of the Bankruptcy Code.

E.

Distributions

 

1.

Distributions Generally

 

The Disbursing Agent will make all Plan Distributions to the appropriate holders of Allowed Claims in accordance with the terms of the Plan.

 

2.

Plan Funding

 

Plan Distributions of Cash will be funded from the Debtors’ and the Reorganized Debtors’ Cash on hand as of the applicable date of such Plan Distribution.

3.

No Postpetition Interest on Claims

 

Except as otherwise specifically provided for in the Plan, including in Sections 4.3 and 4.4 of the Plan, the Confirmation Order, or another order of the Bankruptcy Court or required by the Bankruptcy Code, postpetition interest will not accrue or be paid on any Claims, and no holder of a Claim will be entitled to interest accruing on such Claim on or after the Petition Date.

 

4.

Date of Distributions

 

 

5.

Distribution Record Date

 

As of the close of business on the Distribution Record Date, the various lists of holders of Claims in each Class, as maintained by the Debtors or their agents, will be deemed closed, and there will be no further changes in the record holders of any Claims after the Distribution Record Date.  Neither the Debtors nor the Disbursing Agent will have any obligation to recognize any transfer of a Claim occurring after the close of business on the Distribution Record Date.  In addition, with respect to payment of any Cure Amounts or disputes over any Cure Amounts, neither the Debtors nor the Disbursing Agent will have any obligation to recognize or deal with any party other than the non-Debtor party to the applicable executory contract or unexpired lease, even if such non-Debtor party has sold, assigned, or otherwise transferred its Claim for a Cure Amount.

6.

Disbursing Agent

 

All distributions under the Plan will be made by the Disbursing Agent on and after the Effective Date as provided herein.  The Disbursing Agent will not be required to give any bond or surety or other security for the performance of its duties.  The Reorganized Debtors will use all commercially reasonable efforts to provide the Disbursing Agent (if other than the Reorganized Debtors) with the amounts of Claims and the identities and addresses of holders of Claims, in each case, as set forth in the Debtors’ or Reorganized Debtors’ books and records.  The Reorganized Debtors will cooperate in good faith with the applicable Disbursing Agent (if other than the Reorganized Debtors) to comply with the reporting and withholding requirements outlined in Section 6.17 of the Plan.

7.

Delivery of Distributions

 

The Disbursing Agent will issue or cause to be issued, the applicable consideration under the Plan and, subject to Bankruptcy Rule 9010, will make all distributions to any holder of an Allowed Claim as and when required by the Plan at: (a) the address of such holder on the books and records of the Debtors or their agents, or (b) at the address in any written notice of address change delivered to the Debtors or the Disbursing Agent, including any addresses included on any transfers of Claim filed pursuant to Bankruptcy Rule 3001.  In the event that any distribution to any holder is returned as undeliverable, no distribution or payment to such holder will be made unless and until the Disbursing Agent has been notified of the then-current address of such holder, at which time or as soon thereafter as reasonably practicable such distribution will be made to such holder without interest.

With respect to the Parent Ordinary Shares to be distributed to holders of Allowed Senior Notes Claims, all of the shares of the Parent Ordinary Shares will, to the extent such shares are permitted to be held through DTC’s book-entry system, be issued in the name of such holder or its nominee(s) in accordance with DTC’s book-entry exchange procedures.  To the extent that the Parent Ordinary Shares are not eligible for distribution in accordance with DTC’s customary practices, Reorganized Paragon will take reasonable actions to cause distributions of the Parent Ordinary Shares to holders of Allowed Senior Notes Claims, including by delivery of one or more certificates representing such shares or by means of book-entry registration on the books of the transfer agent for shares of the Parent Ordinary Shares.

 

8.

Unclaimed Property

 

One year from the later of: (a) the Effective Date and (b) the date that is ten (10) Business Days after the date a Claim is first Allowed, all distributions payable on account of such Claim will be deemed unclaimed property under section 347(b) of the Bankruptcy Code and will revert to the Reorganized Debtors or their successors or assigns, and all claims of any other Entity (including the holder of a Claim in the same Class) to such distribution will be discharged and forever barred.  The Reorganized Debtors and the Disbursing Agent will have no obligation to attempt to locate any holder of an Allowed Claim other than by reviewing the Debtors’ books and records and the Bankruptcy Court’s filings.

9.

Satisfaction of Claims

 

Unless otherwise provided herein, any distributions and deliveries to be made on account of Allowed Claims under the Plan will be in complete and final satisfaction, settlement, and discharge of and exchange for such Allowed Claims.

10.

Manner of Payment Under Plan

 

Except as specifically provided herein, at the option of the Debtors or the Reorganized Debtors, as applicable, any Cash payment to be made under the Plan may be made by a check or wire transfer or as otherwise required or provided in applicable agreements or customary practices of the Debtors.

11.

Fractional Shares and De Minimis Cash Distributions

 

No fractional Parent Ordinary Shares will be distributed.  When any distribution would otherwise result in the issuance of a number of Parent Ordinary Shares that is not a whole number, the Parent Ordinary Shares subject to such distribution will be rounded to the next higher or lower whole number as follows: (a) fractions equal to or greater than 1/2 will be rounded to the next higher whole number, and (b) fractions less than 1/2 will be rounded to the next lower whole number.  The total number of Parent Ordinary Shares to be distributed on account of Allowed Senior Notes Claims will be adjusted as necessary to account for the rounding provided for herein.  No consideration will be provided in lieu of fractional shares that are rounded down.  Neither the Reorganized Debtors nor the Disbursing Agent will have any obligation to make a distribution that is less than one (1) share of Parent Ordinary Shares or Fifty Dollars ($50.00) in Cash.  Fractional Parent Ordinary Shares that are not distributed in accordance with Section 6.11 of the Plan will be returned to, and ownership thereof will vest in, Reorganized Paragon.

12.

No Distribution in Excess of Amount of Allowed Claim

 

Notwithstanding anything to the contrary in the Plan, no holder of an Allowed Claim will receive, on account of such Allowed Claim, Plan Distributions in excess of the Allowed amount of such Claim plus any postpetition interest on such Claim, to the extent such interest is permitted by Section 6.3 of the Plan.

13.

Allocation of Distributions Between Principal and Interest

 

Except as otherwise provided in the Plan and subject to Section 6.3 of the Plan, to the extent that any Allowed Secured Claim entitled to a distribution under the Plan is comprised of indebtedness and accrued but unpaid interest thereon, such distribution will be allocated first to the principal amount (as determined for federal income tax purposes) of the Claim and then to accrued but unpaid interest.

 

14.

Exemption from Securities Laws

 

The issuance of and the distribution under the Plan of the Parent Ordinary Shares, the 2016 Deferred Cash Payment, and the 2017 Deferred Cash Payment will be exempt from registration under the Securities Act and any other applicable securities laws to the fullest extent permitted by section 1145 of the Bankruptcy Code.  These securities may be resold without registration under the Securities Act or other federal securities laws pursuant to the exemption provided by section 4(a)(1) of the Securities Act, unless the holder is an “underwriter” with respect to such securities, as that term is defined in section 1145(b) of the Bankruptcy Code.  In addition, such section 1145 exempt securities generally may be resold without registration under state securities laws pursuant to various exemptions provided by the respective laws of the several states.

15.

Setoffs and Recoupments

 

Each Reorganized Debtor, or such entity’s designee as instructed by such Reorganized Debtor, may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy law, offset or recoup against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim any and all claims, rights, and Causes of Action that a Reorganized Debtor or its successors may hold against the holder of such Allowed Claim after the Effective Date; provided, that neither the failure to effect a setoff or recoupment nor the allowance of any Claim hereunder will constitute a waiver or release by a Reorganized Debtor or its successor of any claims, rights, or Causes of Action that a Reorganized Debtor or it successor or assign may possess against such holder.

16.

Rights and Powers of Disbursing Agent

 

 

 

17.

Withholding and Reporting Requirements

 

In connection with the Plan and all instruments issued in connection therewith and distributed thereon, the Reorganized Debtors and the Disbursing Agent will comply with all applicable withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all distributions under the Plan will be subject to any such withholding or reporting requirements.  In the case of a non-Cash distribution that is subject to withholding, the distributing party may withhold an appropriate portion of such distributed property and sell such withheld property to generate Cash necessary to pay over the withholding tax.  Any amounts withheld pursuant to the preceding sentence will be deemed to have been distributed to and received by the applicable recipient for all purposes of the Plan.

 

Notwithstanding the above, each holder of an Allowed Claim that is to receive a distribution under the Plan will have the sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed on such holder by any Governmental Unit, including income, withholding, and other tax obligations, on account of such distribution.  The Reorganized Debtors and the Disbursing Agent have the right, but not the obligation, to not make a distribution until such holder has made arrangements satisfactory to any issuing or disbursing party for payment of any such tax obligations.

 

The Reorganized Debtors and the Disbursing Agent may require, as a condition to receipt of a distribution, that the holder of an Allowed Claim provide any information necessary to allow the distributing party to comply with any such withholding and reporting requirements imposed by any federal, state, local or foreign taxing authority.  If the Reorganized Debtors or the Disbursing Agent make such a request and the holder fails to comply before the date that is 180 days after the request is made, the amount of such distribution will irrevocably revert to the applicable Reorganized Debtor and any Claim in respect of such distribution will be discharged and forever barred from assertion against such Reorganized Debtor or its respective property.

 

F.

Procedures for Resolving Claims

 

1.

Disputed Claims Generally

 

 

 

2.

Objections to Fee Claims

 

Any objections to Fee Claims will be served and filed (a) no later than thirty (30) days after the filing of the final applications for compensation or reimbursement or (b) such later date as ordered by the Bankruptcy Court upon a motion of the Reorganized Debtors.

 

3.

Estimation of Claims

 

The Reorganized Debtors may at any time request that the Bankruptcy Court estimate any contingent, unliquidated, or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the Debtors had previously objected to or otherwise disputed such Claim or whether the Bankruptcy Court has ruled on any such objection.  The Bankruptcy Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim, including, without limitation, during the pendency of any appeal relating to any such objection.  In the event that the Bankruptcy Court estimates any contingent, unliquidated, or Disputed Claim, the amount so estimated will constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court.  If the estimated amount constitutes a maximum limitation on the amount of such Claim, the Reorganized Debtors may pursue supplementary proceedings to object to the allowance of such Claim.

4.

Claim Resolution Procedures Cumulative

 

All of the objection, estimation, and resolution procedures in the Plan are intended to be cumulative and not exclusive of one another.  Claims may be estimated and subsequently settled, compromised, withdrawn, or resolved in accordance with the Plan by any mechanism approved by the Bankruptcy Court.

5.

No Distributions Pending Allowance

 

If an objection, motion to estimate, or other challenge to a Claim is filed, no payment or distribution provided under the Plan will be made on account of such Claim unless and until (and only to the extent that) such Claim becomes an Allowed Claim.

6.

Distributions After Allowance

 

To the extent that a Disputed Claim ultimately becomes an Allowed Claim, distributions (if any) will be made to the holder of such Allowed Claim in accordance with the provisions of the Plan.  As soon as practicable after the date on which the order or judgment of the Bankruptcy Court allowing any Disputed Claim becomes a Final Order, the Disbursing Agent will provide to the holder of such Claim the distribution (if any) to which such holder is entitled under the Plan as of the Effective Date, without any interest to be paid on account of such Claim unless required by the Bankruptcy Code.

G.

Executory Contracts and Unexpired Leases

 

1.

General Treatment

 

 

 

2.

Determination of Cure Disputes and Deemed Consent

 

 

 

3.

Survival of the Debtors’ Indemnification Obligations

 

Any obligations of the Debtors pursuant to their corporate charters, by-laws, limited liability company agreements, memorandum and articles of association, or other organizational documents to indemnify current and former officers, directors, agents, or employees with respect to all present and future actions, suits, and proceedings against the Debtors or such officers, directors, agents, or employees based upon any act or omission for or on behalf of the Debtors will not be discharged, impaired, or otherwise affected by the Plan; provided, that the Reorganized Debtors will not indemnify directors of the Debtors for any Claims or Causes of Action arising out of or relating to any act or omission that is a criminal act or constitutes intentional fraud.  All such obligations will be deemed and treated as executory contracts to be assumed by the Debtors under the Plan and will continue as obligations of the Reorganized Debtors.  Any claim based on the Debtors’ obligations herein will not be a Disputed Claim or subject to any objection, in either case, by reason of section 502(e)(1)(B) of the Bankruptcy Code.

4.

Compensation and Benefit Plans

 

Unless otherwise provided in the Plan, all employment and severance policies, and all compensation and benefits plans, policies, and programs of the Debtors applicable to their respective employees, retirees, and non-employee directors, including, without limitation, all savings plans, retirement plans, healthcare plans, disability plans, severance benefit plans, incentive plans, and life and accidental death and dismemberment insurance plans, are deemed to be, and will be treated as, executory contracts under the Plan and, on the Effective Date, will be assumed pursuant to sections 365 and 1123 of the Bankruptcy Code.  For the avoidance of doubt, any awards granted under the Management Incentive Plan will be governed by such plan and will not be subject to any provisions of the foregoing assumed plans, programs, or arrangements.

 

5.

Insurance Policies

 

All insurance policies to which any Debtor is a party as of the Effective Date will be deemed to be and treated as executory contracts and will be assumed by the applicable Debtor or Reorganized Debtor and will continue in full force and effect thereafter in accordance with their respective terms.  All other insurance policies will vest in the Reorganized Debtors.

6.

Reservation of Rights

 

 

 

 

 

H.

Conditions Precedent to the Occurrence of the Effective Date

 

1.

Conditions Precedent to the Effective Date

 

The Effective Date will not occur unless all of the following conditions precedent have been satisfied:

 

 

 

 

 

 

 

 

 

2.

Waiver of Conditions Precedent

 

 

 

3.

Effect of Failure of a Condition

 

If the conditions listed in Section VI.H.1 are not satisfied or waived in accordance with Section VI.H.2 on or before the first Business Day that is more than sixty (60) days after the date on which the Confirmation Order is entered or by such later date as agreed to by the Required Plan Support Parties and the Debtors and as set forth by the Debtors in a notice filed with the Bankruptcy Court prior to the expiration of such period, the Plan will be null and void in all respects and nothing contained in the Plan or this Disclosure Statement will (a) constitute a waiver or release of any Claims by or against or any Interests in the Debtors, (b) prejudice in any manner the rights of any Entity, or (c) constitute an admission, acknowledgement, offer, or undertaking by the Debtors, any of the other Plan Support Parties, or any other Entity.

I.

Effect of Confirmation

 

1.

Binding Effect

 

Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, and subject to the occurrence of the Effective Date, on and after the entry of the Confirmation Order, the provisions of the Plan will bind every holder of a Claim against or Interest in any Debtor and inure to the benefit of and be binding on such holder’s respective successors and assigns, regardless of whether the Claim or Interest of such holder is impaired under the Plan and whether such holder has accepted the Plan.

 

2.

Vesting of Assets

 

Except as otherwise provided in the Plan, on and after the Effective Date, all Assets of the Estates, including all claims, rights, and Causes of Action (including those Causes of Action identified in the Plan Supplement) and any property acquired by the Debtors under or in connection with the Plan, will vest in each respective Reorganized Debtor free and clear of all Claims, Liens, charges, other encumbrances, and Interests.  Subject to the terms of the Plan, on and after the Effective Date, the Reorganized Debtors may operate their businesses and may use, acquire, and dispose of property and prosecute, compromise, or settle any Claims (including any Administrative Expense Claims) and Causes of Action without supervision of or approval by the Bankruptcy Court and free and clear of any restrictions of the Bankruptcy Code or the Bankruptcy Rules other than restrictions expressly imposed by the Plan or the Confirmation Order.  Without limiting the foregoing, the Reorganized Debtors may pay the charges that they incur on or after the Confirmation Date for Professional Persons’ fees, disbursements, expenses, or related support services without application to the Bankruptcy Court.

3.

Discharge of Claims Against and Interests in the Debtors

 

Upon the Effective Date and in consideration of the distributions to be made under the Plan, except as otherwise provided in the Plan or in the Confirmation Order, each holder (as well as any trustee or agent on behalf of such holder) of a Claim or Interest and any affiliate of such holder will be deemed to have forever waived, released, and discharged the Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Interests, rights, and liabilities that arose prior to the Effective Date.  Except as otherwise provided in the Plan, upon the Effective Date, all such holders of Claims and Interests and their affiliates will be forever precluded and enjoined, pursuant to sections 105, 524, and 1141 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against or terminated Interest in any Debtor or any Reorganized Debtor.

4.

Term of Pre-Confirmation Injunctions and Stays

 

Unless otherwise provided in the Plan, all injunctions and stays arising under or entered during the Chapter 11 Cases, whether under sections 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the date of entry of the Confirmation Order, will remain in full force and effect until the later of the Effective Date and the date indicated in the order providing for such injunction or stay.

5.

Plan Injunction

 

 

 

6.

Releases

 

 

“Released Parties” means, collectively, and in each case in their capacities as such: (a) the Debtors; (b) the Debtors’ non-Debtor affiliates; (c) the Plan Support Parties; (d) the Revolving Credit Facility Agent; (e) JP Morgan Chase Bank, N.A., in its capacity as former administrative agent under the Secured Term Loan Agreement; (f) the Disbursing Agent; (g) each of the Syndication Agents, Documentation Agents, Joint Lead Arrangers and Joint Lead Bookrunners named in the Revolving Credit Agreement; (h) each of the Issuing Banks under the Revolving Credit Agreement; (i) the Senior Notes Indenture Trustee; and (j) with respect to each of the foregoing entities, such entities’ predecessors, professionals, successors, assigns, subsidiaries, affiliates, managed accounts and funds, current and former officers and directors, principals, shareholders, members, partners, managers, employees, subcontractors, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors, and other professionals, and such entities’ respective heirs, executors, estates, servants, and nominees, in each case in their capacity as such.

 

 

 

 

7.

Exculpation

 

To the extent permitted by applicable law, no Exculpated Party will have or incur, and each Exculpated Party is hereby released and exculpated from, any claim, obligation, suit, judgment, damage, demand, debt, right, Cause of Action, loss, or liability for any claim in connection with or arising out of the administration of the Chapter 11 Cases; the negotiation and pursuit of the Disclosure Statement, the Plan Support Agreement, the Restructuring Transactions, the Plan, or the solicitation of votes for, or confirmation of, the Plan; the funding of the Plan; the occurrence of the Effective Date; the administration of the Plan or the property to be distributed under the Plan; the issuance of securities under or in connection with the Plan; or the transactions in furtherance of any of the foregoing; except for willful misconduct or gross negligence.  This exculpation will be in addition to, and not in limitation of, all other releases, indemnities, exculpations, and any other applicable law or rules protecting such Exculpated Parties from liability.

Exculpated Parties means, collectively, and in each case in their capacities as such: (a) the Debtors; (b) the Debtors’ non-Debtor affiliates; (c) the Plan Support Parties; (d) the Disbursing Agent; and (e) with respect to each of the foregoing entities, such entities’ predecessors, professionals, successors, assigns, subsidiaries, affiliates, managed accounts and funds, current and former officers and directors, principals, shareholders, members, partners, managers, employees, subcontractors, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors, and other professionals, and such entities’ respective heirs, executors, estates, servants, and nominees, in each case in their capacity as such.

 

8.

Injunction Related to Releases and Exculpation

 

The Confirmation Order will permanently enjoin the commencement or prosecution by any Entity, whether directly, derivatively, or otherwise, of any Claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action, losses, or liabilities released pursuant to the Plan, including, without limitation, the claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action, and liabilities released or exculpated in the Plan.

9.

Subordinated Claims

 

The allowance, classification, and treatment of all Allowed Claims and Allowed Interests and the respective distributions and treatments thereof under the Plan take into account and conform to the relative priority and rights of the Claims and Interest in each Class in connection with any contractual, legal, and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, sections 510(a), 510(b), or 510(c) of the Bankruptcy Code, or otherwise.  Pursuant to section 510 of the Bankruptcy Code, the Debtors reserve the right to reclassify any Allowed Claim or Allowed Interest in accordance with any contractual, legal, or equitable subordination relating thereto.

10.

Retention of Causes of Action and Reservation of Rights

 

Subject to Sections 10.6 and 10.7 of the Plan, nothing contained in the Plan or the Confirmation Order will be deemed to be a waiver or relinquishment of any rights, claims, Causes of Action (including those Causes of Action identified in the Plan Supplement), rights of setoff or recoupment, or other legal or equitable defenses that the Debtors had immediately before the Effective Date on behalf of the Estates or of themselves in accordance with any provision of the Bankruptcy Code or any applicable nonbankruptcy law.  Subject to Sections 10.6, 10.7, and 10.8 of the Plan, the Reorganized Debtors will have, retain, reserve, and be entitled to assert all such claims, Causes of Action, rights of setoff or recoupment, and other legal or equitable defenses as fully as if the Chapter 11 Cases had not been commenced, and all of the Debtors’ legal and equitable rights in respect of any Unimpaired Claim may be asserted after the Effective Date to the same extent as if the Chapter 11 Cases had not been commenced.

 

11.

Ipso Facto and Similar Provisions Ineffective

 

Any term of any policy, contract, or other obligation applicable to a Debtor will be void and of no further force or effect with respect to any Debtor to the extent that such policy, contract, or other obligation is conditioned on, creates an obligation of the Debtor as a result of, or gives rise to a right of any Entity based on any of the following: (a) the insolvency or financial condition of a Debtor; (b) the commencement of the Chapter 11 Cases; (c) the confirmation or consummation of the Plan, including any change of control that will occur as a result of such consummation; or (d) the Restructuring.

12.

Indemnification and Reimbursement Obligations

 

For purposes of the Plan, (a) the obligations of the Debtors to indemnify and reimburse their current and former directors or officers will be assumed by the Reorganized Debtors and (b) indemnification obligations of the Debtors arising from services as officers and directors during the period from and after the Petition Date will be Administrative Expense Claims.

J.

Retention of Jurisdiction

 

Pursuant to sections 105(c) and 1142 of the Bankruptcy Code and notwithstanding entry of the Confirmation Order and the occurrence of the Effective Date, on and after the Effective Date, the Bankruptcy Court will retain exclusive jurisdiction, pursuant to 28 U.S.C. §§ 1334 and 157, over all matters arising in or related to the Chapter 11 Cases for, among other things, the following purposes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

provided, that on and after the Effective Date, the Bankruptcy Court will not retain jurisdiction over any matters arising out of or related to the Amended and Restated Credit Agreement.

 

K.

Miscellaneous Provisions

 

1.

Amendments

 

 

 

2.

Revocation or Withdrawal of Plan

 

The Debtors reserve the right to revoke or withdraw the Plan prior to the Effective Date as to any or all of the Debtors.  If, with respect to a Debtor, the Plan has been revoked or withdrawn prior to the Effective Date, or if confirmation or the occurrence of the Effective Date as to such Debtor does not occur on the Effective Date, then, with respect to such Debtor: (a) the Plan will be null and void in all respects; (b) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount any Claim or Interest or Class of Claims or Interests), assumption of executory contracts or unexpired leases affected by the Plan, and any document or agreement executed pursuant to the Plan will be deemed null and void; and (c) nothing contained in the Plan will (i) constitute a waiver or release of any Claim by or against, or any Interest in, such Debtor or any other Entity; (ii) prejudice in any manner the rights of such Debtor or any other Person or entity; or (iii) constitute an admission of any sort by any Debtor or any other Person or entity.

3.

Exemption from Certain Transfer Taxes

 

To the fullest extent permitted by applicable law, the issuance, transfer, or exchange of any security or other property hereunder, as well as all sale transactions consummated by the Debtors and approved by the Bankruptcy Court on and after the Confirmation Date through and including the Effective Date, including any transfers effectuated under the Plan, and any assumption, assignment, or sale by the Debtors of their interests in unexpired leases of nonresidential real property or executory contracts pursuant to section 365(a) of the Bankruptcy Code, will constitute a “transfer under a plan” within the purview of section 1146 of the Bankruptcy Code and will not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.

4.

Payment of Statutory Fees

 

All fees payable under section 1930 of chapter 123 of title 28 of the United States Code will be paid on the Effective Date, or as soon as practicable thereafter, by the Debtors or Reorganized Debtors.  Quarterly fees owed to the U.S. Trustee will be paid when due in accordance with applicable law and the Debtors and Reorganized Debtors will continue to file reports to show the calculation of such fees for the Debtors’ Estates until the Chapter 11 Cases are closed under section 350 of the Bankruptcy Code.  Each and every one of the Debtors will remain obligated to pay quarterly fees to the U.S. Trustee until the earliest of that particular Debtor’s case is closed, dismissed, or converted to a case under Chapter 7 of the Bankruptcy Code.

 

5.

Severability

 

Subject to Section 5.9 of the Plan, if, prior to the entry of the Confirmation Order, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court, at the request of the Debtors, will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision will then be applicable as altered or interpreted.  Notwithstanding any such holding, alteration, or interpretation by the Bankruptcy Court, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation.  The Confirmation Order will constitute a judicial determination and will provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with Section 12.5 of the Plan, is valid and enforceable pursuant to its terms.

6.

Governing Law

 

Except to the extent that the Bankruptcy Code or other federal law is applicable or to the extent that a Plan Document provides otherwise, the rights, duties, and obligations arising under the Plan and the Plan Documents will be governed by, and construed and enforced in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflict of laws thereof.

7.

Immediate Binding Effect.

 

Notwithstanding Bankruptcy Rules 3020(e), 6004(h), 7062, or otherwise, upon the occurrence of the Effective Date, the terms of the Plan and the Plan Documents will be immediately effective and enforceable and deemed binding upon and inure to the benefit of the Debtors, the Reorganized Debtors, the holders of Claims and Interests, the Released Parties, the Exculpated Parties, and each of their respective successors and assigns.

8.

Successors and Assigns.

 

The rights, benefits, and obligations of any Entity named or referred to in the Plan will be binding on and will inure to the benefit of any heir, executor, administrator, successor, or permitted assign, if any, of each such Entity.

9.

Entire Agreement.

 

On the Effective Date, the Plan, the Plan Supplement, and the Confirmation Order will supersede all previous and contemporaneous negotiations, promises, covenants, agreements, understandings, and representations on such subjects, all of which have become merged and integrated into the Plan.

10.

Computing Time.

 

In computing any period of time prescribed or allowed by the Plan, unless otherwise set forth in the Plan or determined by the Bankruptcy Court, the provisions of Bankruptcy Rule 9006 will apply.

11.

Exhibits to Plan.

 

All exhibits, schedules, supplements, and appendices to the Plan (including the Plan Supplement) are incorporated into and are a part of the Plan as if set forth in full herein.

12.

Notices.

 

All notices, requests, and demands to or upon the Debtors or Reorganized Debtors, as applicable, will be in writing (including by email transmission) and, unless otherwise provided herein, will be deemed to have been duly given or made only when actually delivered, addressed as follows:

 

Paragon Offshore plc

c/o Paragon Offshore Services LLC

3151 Briarpark Drive

Houston, Texas  77042

Telephone: (832) 783-4000

 

– and –

 

Richards, Layton & Finger, P.A.

One Rodney Square

920 North King Street

Wilmington, Delaware 19801

Telephone:  (302) 651-7700

– and –

 

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York  10153

Stephen A. Youngman, Esq.

Telephone:  (212) 310-8000

stephen.youngman@weil.com

 

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Elizabeth R. McColm, Esq.

Telephone:  (212) 373-3000

emccolm@paulweiss.com

 

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Kathrine A. McLendon, Esq.

Telephone: (212) 455-2000

kmclendon@stblaw.com

After the occurrence of the Effective Date, the Reorganized Debtors have authority to send a notice to Entities that to continue to receive documents pursuant to Bankruptcy Rule 2002, such Entities must file a renewed request to receive documents pursuant to Bankruptcy Rule 2002.  After the occurrence of the Effective Date, the Reorganized Debtors are authorized to limit the list of Entities receiving documents pursuant to Bankruptcy Rule 2002 to those Entities that have filed such renewed requests.

 

13.

Reservation of Rights.

 

Except as otherwise provided herein, the Plan will be of no force or effect unless the Bankruptcy Court enters the Confirmation Order.  None of the filing of the Plan, any statement or provision of the Plan, or the taking of any action by the Debtors with respect to the Plan will be or will be deemed to be an admission or waiver of any rights of the Debtors with respect to any Claims or Interests prior to the Effective Date.

VII.

 

A.

Consolidated Condensed Projected Financial Information

 

 

The Debtors do not, as a matter of course, publish their business plans or strategies, projections or anticipated financial position.  Accordingly, the Debtors do not anticipate that they will, and disclaim any obligation to, furnish updated business plans or Projections to holders of Claims or other parties in interest after the Confirmation Date, or to include such information in documents required to be filed with the SEC or otherwise make such information public, unless required to do so by the SEC or other regulatory bodies pursuant to the provisions of the Plan.  In connection with the development of the Plan, the Projections were prepared by the Debtors, with the assistance of their advisors, to present the anticipated impact of the Plan.  The Projections assume that the Plan will be implemented in accordance with its stated terms.  The Projections are based on forecasts of key economic variables and may be significantly impacted by, among other factors, oil and natural gas prices, expectations regarding future commodity prices, the level of activity of oil and natural gas exploration, development, and production globally, demand for drilling services, competition and supply of competing rigs, changes in the political environment of the countries in which the Paragon Group operates, regulatory changes, and/or a variety of other factors.  Consequently, the estimates and assumptions underlying the Projections are inherently uncertain and are subject to material business, economic, and other uncertainties.  Therefore, such Projections, estimates, and assumptions are not necessarily indicative of current values or future performance, which may be significantly less or more favorable than set forth herein.  The Projections included herein were last updated on February 8, 2016.

 

The Projections should be read in conjunction with the significant assumptions, qualifications, and notes set forth below.

 

THE DEBTORS PREPARED THE PROJECTIONS WITH THE ASSISTANCE OF THEIR ADVISORS.  THE DEBTORS DID NOT PREPARE SUCH PROJECTIONS TO COMPLY WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND THE RULES AND REGULATIONS OF THE SEC.  EXCEPT FOR PURPOSES OF THIS DISCLOSURE STATEMENT, THE DEBTORS DO NOT PUBLISH PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS.

 

MOREOVER, THE PROJECTIONS CONTAIN CERTAIN STATEMENTS THAT ARE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.  THESE STATEMENTS ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS, AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE DEBTORS, INCLUDING THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, ACHIEVING OPERATING EFFICIENCIES, EXISTING AND FUTURE GOVERNMENTAL REGULATIONS AND ACTIONS OF GOVERNMENTAL BODIES, INDUSTRY-SPECIFIC RISK FACTORS, AND OTHER MARKET AND COMPETITIVE CONDITIONS.  HOLDERS OF CLAIMS AND INTERESTS ARE CAUTIONED THAT THE FORWARD-LOOKING STATEMENTS SPEAK AS OF THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE.  ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND THE DEBTORS UNDERTAKE NO OBLIGATION TO UPDATE ANY SUCH STATEMENTS.

 

THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY THE DEBTORS, MAY NOT BE REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, INDUSTRY, REGULATORY, LEGAL, MARKET, AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE REORGANIZED DEBTORS’ CONTROL.  THE DEBTORS CAUTION THAT NO REPRESENTATIONS CAN BE MADE OR ARE MADE AS TO THE ACCURACY OF THE PROJECTIONS OR TO THE REORGANIZED DEBTORS’ ABILITY TO ACHIEVE THE PROJECTED RESULTS.  SOME ASSUMPTIONS INEVITABLY WILL BE INCORRECT.  MOREOVER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THE DEBTORS PREPARED THESE PROJECTIONS MAY BE DIFFERENT FROM THOSE ASSUMED, OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER.  EXCEPT AS OTHERWISE PROVIDED IN THE PLAN OR THIS DISCLOSURE STATEMENT, THE DEBTORS AND REORGANIZED DEBTORS, AS APPLICABLE, DO NOT INTEND AND UNDERTAKE NO OBLIGATION TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT EVENTS OR CIRCUMSTANCES EXISTING OR ARISING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.  THEREFORE, THE PROJECTIONS MAY NOT BE RELIED UPON AS A GUARANTEE OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.  IN DECIDING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, HOLDERS OF CLAIMS MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS AND SHOULD CONSULT WITH THEIR OWN ADVISORS.

 

The Projections should be read in conjunction with the assumptions, qualifications, and explanations set forth in this Disclosure Statement, the Plan, and the Plan Supplement, in their entirety, and the historical consolidated financial statements (including the notes and schedules thereto).

 

 

		FYE December 31,
(US $ in thousands)			2015E			June 2016P (Pro Forma)					2016P				2017P				2018P				2019P
ASSETS
Cash and Cash Equivalents		$	776,571			$	205,283			$	202,085			$	170,566			$	244,231			$	417,158
Accounts Receivable			266,325				185,346				165,769				202,874				246,930				265,675
Prepaid Expenses and Deposits			35,286				40,487				27,393				26,899				26,899				26,899
Taxes Receivable			42,744				42,744				42,744				42,744				42,744				42,744
Other Current Assets			31,998				46,347				29,659				29,939				30,373				29,932
Current Assets		$	1,152,924			$	520,207			$	467,651			$	473,023			$	591,177			$	782,408
PP&E		$	1,111,099			$	1,119,227			$	1,037,355			$	1,003,475			$	973,469			$	934,546
Other Assets			127,570				119,960				112,274				97,771				91,808				85,845
Total Assets		$	2,391,593			$	1,759,394			$	1,617,279			$	1,574,268			$	1,656,453			$	1,802,799
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-Term Debt		$	40,629			$	38,950			$	36,314			$	29,510			$	30,881			$	94,737
Accounts Payable			85,374				78,712				56,723				70,829				76,108				74,932
Other Current Liabilities			158,975				173,849				153,673				134,125				135,081				135,422
Current Liabilities		$	284,978			$	291,512			$	246,710			$	234,464			$	242,070			$	305,091
Revolver		$	708,500			$	543,500			$	543,500			$	543,500			$	543,500			$	543,500
Term Loan			632,821				608,811				605,793				599,758				593,722				533,530
Prospector Capital Leases (Long-Term Portion)			234,560				206,695				178,021				135,954				100,621				--
Senior Notes			983,582				--				--				--				--				--
Deferred Taxes and Other			50,637				80,637				80,637				80,637				50,637				50,637
Total Liabilities		$	2,895,078			$	1,731,155			$	1,654,661			$	1,594,313			$	1,530,550			$	1,432,758
Shareholders' Equity(a)			(503,485	)			28,239				(37,382	)			(20,044	)			125,904				370,040
Total Liabilities and Shareholders' Equity		$	2,391,593			$	1,759,394			$	1,617,279			$	1,574,268			$	1,656,453			$	1,802,799