Shareholders the loser as Seadrill announces restructuring under chapter 11

John Fredriksen’s Seadrill has reached a restructuring agreement with its bank lenders, 40% of its bondholders and a consortium of investors including Fredriksen’s own Hemen Holdings which sees Seadrill and subsidiaries North Atlantic Drilling and Sevan Drilling all placed under chapter 11 bankruptcy protection.

Seadrill says the restructuring agreement will deliver $1.06bn of new capital through $860m of secured notes and $200m of equity, and additionally the company’s secured lending banks have agreed to defer maturities of around $5.7bn in secured credit facilities by five years with no amortization payments until 2020.

Assuming unsecured creditors support the proposed plan as well, Seadrill’s $2.3bn of unsecured bonds and other unsecured claims will be converted into around 15% of the post-restructured equity.

Common stock shareholders however will only receive approximately 2% of the post-structured equity while shareholders in North Atlantic Drilling and Sevan Drilling will receive no recovery whatsoever.

Anton Dibowitz, CEO and president of Seadrill Management, commented: “The restructuring agreement we signed today is a comprehensive plan that raises over $1bn of new capital, is underpinned by Hemen Holding Ltd., our largest shareholder, and is overwhelmingly supported by our banks and approximately 40% of our bondholders. This is a testament to our position in the sector, having a large, modern fleet, a top-quality customer base and a proven operating track record. With our improved capital structure, we will be in a strong position to capitalise when the market recovers.”

Seadrill has filed prearranged chapter 11 cases in the Southern District of Texas with the agreed restructuring plan which, if granted, will enable it to continue its day-to-day operations. The filing includes a request for authority to pay its key trade creditors and employee wages and benefits without change or interruption. Vendors are expected to all be paid in full.

While North Atlantic Drilling and Sevan Drilling have also filed for chapter 11, non-consolidated affiliates Seadrill Partners, SeaMex and Archer Limited did not file for chapter 11 and have been successfully ringfenced.

Grant Rowles

Grant spent nine years at Informa Group based in London, Sydney, Hong Kong and Singapore. He gained strong management experience in publishing, conferences and awards schemes in the shipping and legal areas, working on a number of titles including Lloyd's List. In 2009 Grant joined Seatrade responsible for the commercial development of Seatrade’s Asia products. In 2012, with Sam Chambers, he co-founded Asia Shipping Media.
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