RIG Transocean Ltd

By Andrew Scurria 

A federal judge upheld a $1.5 billion debt restructuring by offshore-drilling contractor Transocean Ltd., ruling against a hedge-fund bondholder that claimed it was treated unfairly as the company took steps to survive a turbulent oil market.

Judge George B. Daniels of the U.S. District Court in New York rejected efforts by Whitebox Advisors LLC to call a debt default against Transocean during a painful period for deep-water drilling that has sent several peer companies to bankruptcy.

Transocean has stayed afloat in part through a September bond exchange covering roughly $1.5 billion in debt that shaved some $826 million from the company's balance sheet. Whitebox and Pacific Investment Management Co. held out, objecting to the exchange and saying their claims against some Transocean assets had been weakened in violation of debt contracts.

In September, they told Transocean they believed the restructuring amounted to a default and sued the company. The default notice gave the company 90 days, until Dec. 1, to resolve the allegation or else risk accelerated bond repayments, the loss of bank credit and a forced bankruptcy filing.

The company denied it was in default and called the allegations baseless. Still, with the Dec. 1 deadline looming, Transocean unwound some asset-shifting maneuvers that Whitebox had complained about. The company said that resolved the alleged default before the cure period lapsed and investors could take action.

On Thursday, the judge said no default had occurred. Whitebox didn't immediately respond to a request for comment.

Transocean isn't alone among offshore drilling contractors in facing severe financial strains. Several of the Switzerland-based company's competitors have restructured their balance sheets in recent months, slammed by volatile crude prices and the coronavirus pandemic's impact on global oil demand.

The world's largest deep-water rig owner, Transocean is on more solid footing than U.S. offshore contractor Diamond Offshore Drilling Inc., the U.K.'s Noble Corp. and Valaris PLC and Luxembourg-based Pacific Drilling SA, all of which have filed for bankruptcy since April.

Transocean had accused Whitebox in court papers of waging a campaign to force an unnecessary bankruptcy in which bondholders like itself could take equity control.

Even before the pandemic, a sluggish oil market had idled many offshore fleets as advanced techniques for tapping deep oil deposits on land led to record oil production in the U.S., diverting investment interest from more-complex drilling offshore.

Write to Andrew Scurria at andrew.scurria@wsj.com

(END) Dow Jones Newswires

December 17, 2020 12:47 ET (17:47 GMT)

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