Seadrill Reshuffles Bankruptcy Workout Plan to Build Support
February 26 2018 - 6:39PM
Dow Jones News
By Peg Brickley
Seadrill Ltd., the offshore energy company run by Norwegian
billionaire John Fredriksen, quelled opposition to its bankruptcy
exit plan by making room for more creditors to invest in getting
the company back on its feet.
Weeks of talks headed off a threatened open-court battle over
Seadrill's attempt to reshuffle its debts and bring in new money.
An April 17 court hearing has been set for a chapter 11 plan
confirmation hearing, where a bankruptcy judge in Houston will be
asked to authorize Seadrill to raise new money and refashion its $8
billion load of debt. On Monday, Judge David R. Jones granted
Seadrill permission to start the process of polling creditors on a
chapter 11 restructuring plan designed to get the company in
financial shape to compete for business in the rocky energy
market.
With its profits hurt by a slump in drilling activity, Seadrill
filed for chapter 11 bankruptcy protection last year, having
reached a deal that would allow Mr. Fredriksen, private-equity firm
Centerbridge Partners and a handful of investment firms to raise
more than $1 billion to bail the company out of trouble.
Creditors left on the sidelines, including Barclays Capital and
a cadre of unsecured bondholders, protested, complaining that
Centerbridge and Mr. Fredriksen had unfairly put together a
sweetheart deal for themselves and a few supporters.
The official committee representing all unsecured creditors
agreed, and started getting ready to sue.
On Monday, Seadrill unveiled settlements that will stop the
legal threats and bring support for the chapter 11 turnaround plan
to at least 70% of unsecured bondholders, up from the 40% level of
support the original plan enjoyed.
Barclays and the unsecured bondholder groups are dropping
threats to put together rival restructuring deals, after being
invited into the investment opportunity on favorable terms. The
official committee of unsecured creditors is now urging a "yes"
vote on the revised plan because of the improved treatment,
according to new chapter 11 plan papers filed Monday in the U.S.
Bankruptcy Court in Houston.
Thomas Moers Mayer, lawyer for the committee, said Monday that
Seadrill's banks agreed to stretch out the maturity on their loans,
as long as the company raised at least $1 billion in fresh cash to
shore up its finances to weather tough industry conditions. The
question for Seadrill was "who got the opportunity" to participate
in the bailout, Mr. Mayer said. Under pressure from Barclays and
the bondholder group, Seadrill made room in the deal for more
participants in the investment, and found some cash for junior
creditors that aren't positioned to make the investment.
Seadrill estimates general unsecured creditors are being offered
debt investment rights worth at least $239 million, as well as
equity rights worth at least $136 million, in the revised plan,
court papers say. As a result, some unsecured creditors could
recover as much as 47% of what they are owed, a 15-point
improvement from the original plan, court papers say.
The company also made peace with Samsung Heavy Industries Co.
Ltd. and Daewoo Shipbuilding & Marine Engineering Co. The
shipyard operators together accounted for about $1 billion in
potential claims against Seadrill.
When it filed for bankruptcy, Seadrill had signed contracts for
the construction of new drillships, deals that could have erupted
into litigation. Instead, Daewoo, Samsung and Seadrill agreed to
push the contracts aside for now, and allow the new rigs to be
marketed for sale.
Some things didn't change in the revised turnaround plan. As in
the original plan, top-ranking banks will stretch out the maturity
on their loans, giving Seadrill a longer period of time to recover
from the energy-market turmoil. Seadrill shareholders that fought a
losing battle for better treatment will get a 2% stake in the
reorganized company, less than half of what Mr. Fredriksen's
investment company, Hemen Holding, will collect as a "fee" for
going along with the restructuring.
Mr. Fredriksen, who had negotiated an immunity deal that
shielded him from lawsuits over his handling of the company's
affairs as part of the original turnaround strategy, will continue
to be protected from litigation under the revised plan.
Not long before before Seadrill's September bankruptcy filing,
Seadrill paid a Cyprus affiliate controlled by Mr. Fredriksen about
$21 million. Additionally, the company paid about $23 million in
salaries and bonuses to high-ranking company leaders whom, in a
break from bankruptcy practices in the U.S., it is refusing to
name, according to court papers. Seadrill is resisting pressure
from U.S. bankruptcy watchdogs to disclose the details of payments
to insiders.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
February 26, 2018 18:24 ET (23:24 GMT)
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