As Seadrill Foundered, Lawyers, Executives Profited
November 14 2017 - 11:29AM
Dow Jones News
By Peg Brickley
Battered offshore oil-and-gas contractor Seadrill Ltd. paid
bankruptcy professionals well over $100 million before it stepped
through the door of a Texas court in September, seeking chapter 11
protection from creditors.
The payments turned up in new court papers Seadrill filed Friday
in the U.S. Bankruptcy Court for the Southern District of Texas.
They reveal the high cost of the talks that produced Seadrill's
chapter 11 turnaround strategy.
One of many offshore drilling operations hurt by low oil prices,
Seadrill is pursuing a balance-sheet restructuring and
capital-raising effort that will squeeze the holdings of
rank-and-file shareholders, but leave founder and board chairman
John Fredriksen with a major stake, along with Centerbridge
Partners.
The plan is the product of discussions with investment firms
interested in the future of Seadrill, one of the world's largest
offshore drilling contractors. Seadrill businesses involved in the
bankruptcy are carrying about $8 billion in debt, court papers
say.
Except for Mr. Fredriksen, Seadrill shareholders weren't
involved in the restructuring talks. Recently, shareholders lost a
bid to have an official committee appointed to represent them in
Seadrill's bankruptcy, after the company argued it was hopelessly
insolvent, worth far less than its debts. An official shareholders
committee would have provided common shareholders a team of lawyers
and financial advisers to look out for their interests.
Unlike the professional fees paid during the chapter 11 case,
Seadrill's pre-bankruptcy spending isn't subject to judicial
scrutiny.
Kirkland & Ellis, the law firm guiding Seadrill through
chapter 11, collected more than $47 million in the year before the
company filed for bankruptcy protection, court papers say.
While it was paying its own lawyers and advisers, the company
also paid for lawyers and financial consultants for major
creditors.
In the 90 days before the bankruptcy petition was filed,
Seadrill paid nearly $12 million to the law firm -- Fried, Frank,
Harris, Shriver & Jacobson LLP -- representing Centerbridge.
About half of that amount was paid for "services." The day of the
bankruptcy filing, Seadrill sent $6 million by wire transfer to the
New York law firm. Court papers didn't specify the purpose of the
wire transfer funds.
Cadwalader Wickersham & Taft LLP, another law firm advising
on Seadrill's bailout, was paid more than $10 million in the 90
days before the bankruptcy, including a $5 million transfer the day
of the bankruptcy filing. Again, half the money was for "services,"
and the purpose of the wire-transferred funds isn't specified in
court papers.
The lawyers weren't the only ones getting paid during Seadrill's
restructuring talks, according to court papers. Less than a week
before the bankruptcy filing, nearly $20 million went to Hemen
Investments Ltd. a Cyprus affiliate of Hemen Holding, which is
controlled by Mr. Fredriksen, a Norwegian billionaire. Court papers
say the money was for "services."
Hemen and Centerbridge are part of the group providing $1
billion in new investment to get Seadrill out of bankruptcy with a
plan that swaps some debt for equity and gives the offshore driller
more time to pay off major loans. Also in that group are Aristeia
Capital LLC, GLG Partners LP, Saba Capital Management LP and
Whitebox Advisors LLC, according to filings with the Securities and
Exchange Commission.
As for any payments to Mr. Fredriksen himself, the documents are
mum. In a break with standard bankruptcy practice, Seadrill
reported paying insiders an aggregate of more than $23 million in
salaries and other items in the 12-month period leading up to the
filing, but didn't provide names or even say how many insiders
shared that money. Included in that figure is nearly $10 million
the struggling company handed out in bonuses to insiders, who are
typically top-ranking executives or members of the board of
directors. The bonus figure includes letters of credit that were
issued to insiders, but not drawn against, court papers say.
Seadrill, its lawyers and the Office of the U.S. Trustee, an arm
of the U.S. Department of Justice responsible for bankruptcy
oversight, didn't respond to inquiries about the missing details on
the official bankruptcy reporting forms.
The court papers are part of the financial disclosure required
of companies seeking a fresh start by filing for chapter 11
bankruptcy protection. Creditors review the reports to get a
picture of the company's finances. A lawyer for the official
committee representing Seadrill's unsecured creditors didn't
respond to a request to comment on the insider pay.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
November 14, 2017 11:14 ET (16:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Seadrill (NYSE:SDRL)
Historical Stock Chart
From Feb 2024 to Mar 2024
Seadrill (NYSE:SDRL)
Historical Stock Chart
From Mar 2023 to Mar 2024