George Economou has chosen to send beleaguered NASDAQ-listed Ocean Rig in for bankruptcy protection, sparking a massive rout on the offshore company’s share price today.
Ocean Rig will be deleveraged by an exchange of $3.69bn principal amount of debt for new equity of the company, approximately $288m of cash and $450m of new secured debt.
Existing shareholders will be diluted to an insignificant amount of post-restructuring equity of the company while 9.5% of new equity will be reserved under a new management equity plan.
George Economou, Ocean Rig’s chairman and CEO, commented: “Ocean Rig, similar to all rig operators, faces a deep and prolonged industry downturn. Given these conditions, Ocean Rig is taking the appropriate steps to allow us to emerge as a much stronger company that can take advantage of opportunities as they emerge. Our entire team at Ocean Rig is wholly committed to the success of the company and looks forward to our emergence from this financial restructuring that will ultimately enable us to better service our customers in the long term.”
According to New York share analyst Seeking Alpha, Economou will be able to save his stake in Ocean Rig despite bankruptcy.
“Although painful, this is an invaluable experience for investors which teaches them to watch management incentives closely and to not automatically expect that management interests are aligned with interests of common shareholders,” Seeking Alpha noted today, adding: “Shareholders of other drillers should watch this development closely because it is a major event for the whole offshore drilling industry.”
In April last year, Economou’s Nasdaq-listed dry bulk shipping entity DryShips ended its investment in Ocean Rig, having held a stake since 2007.
