Offshore driller Valaris has entered into a binding restructuring support agreement (RSA) and backstop commitment agreement (BCA) with around 50% of its noteholders which will see it undergo a financial restructuring while under chapter 11.
Valaris says the restructuring is to reduce its debt load substantially, support continued operations during the current offshore slump and provide a platform for the company to take advantage of a future market recovery.
To implement the restructuring, Valaris has filed for chapter 11 in the United States Bankruptcy Court for the Southern District of Texas.
The agreed RSA and BCA will see the full equitization of the company’s pre-petition revolving credit facility and unsecured notes, a fully backstopped rights offering to noteholders for $500m of new secured notes, the effective cancellation of existing equity interests in the company in exchange for, in certain circumstances, warrants for post-emergence equity, and payment of trade claims in full in cash.
Valaris says it remains confident that it will be able to maintain liquidity and operate in the ordinary course of business as it has around $175m in cash and committed Debtor-in-Possession financing from certain noteholders to provide the company with an additional $500m.
Tom Burke, president and CEO of Valaris, commented: “The substantial downturn in the energy sector, exacerbated by the COVID-19 pandemic, requires that we take this step to create a stronger company able to adapt to the prolonged contraction in the industry, and to continue to enhance our position as overall market conditions improve.
“We have taken several steps to right-size and streamline our organization in line with our goal to be the offshore drilling cost leader. Now, we intend to use this restructuring to complement these measures to create a stronger financial structure for the Company. Valaris will continue to serve our customers uninterrupted through this process, delivering safe and reliable operations, through its highly-capable rig fleet.”
Valaris, formed by the combination of Ensco and Rowan Companies, has a fleet of 14 drillships, 10 semi-submersible rigs and seven jackup rigs according to the company’s latest fleet status report.