Diamond Offshore Drilling, noteholders in restructuring negotiations

By Caroline Salls

Pittsburgh, Aug. 3 – Diamond Offshore Drilling, Inc. is in continuing negotiations with its senior noteholders on the terms of a potential restructuring, according to an 8-K filed Monday with the Securities and Exchange Commission.

Although no agreement has been reached yet, Diamond Offshore said it provided a draft plan term sheet to the noteholders, and the holders provided a draft restructuring term sheet as part of the negotiations.

The company’s proposal calls for a new revolving credit facility and unsecured term loan, as well as a rights offering that allows noteholders to purchase new PIK toggle second-lien notes due 2025 and 10% of the common stock in the reorganized company.

Administrative claims and priority claims would be paid in full in cash.

Holders of revolving credit facility claims would receive a share of the new revolver and term loan.

Other secured claims would be paid in full in cash or otherwise be rendered unimpaired.

Holders of notes unsecured claims would receive a share of 90% of the common stock in the reorganized company, subject to dilution by warrants, a management incentive plan and the general unsecured claim distribution. These noteholders will also have the right to participate in the rights offering.

Holders of general unsecured claims would receive a share of the new common stock, subject to dilution by the incentive plan and warrants.

Existing equity interests would be cancelled, released, discharged and extinguished, and holders will receive warrants representing 5% of the new common shares, subject to dilution by the incentive plan.

Meanwhile, under the noteholders’ proposal, a $225 million equity rights offering would be backstopped by members of an informal noteholders’ group and be used to fund a $165 million paydown of the company’s revolver and exit costs and to augment liquidity.

Participation in the offering would be open to all creditors and equity holders.

Existing revolving lenders would commit to providing a $600 million first-lien exit facility, which would be undrawn and accrue interest at Libor plus 425 basis points.

Holders of revolving credit facility claims would receive the rights offering proceeds, a new second-lien 7% exit facility and equity equal to $50 million at the plan equity value.

Holders of unsecured notes would receive 100% of the reorganized company’s equity, a lesser amount to be distributed to general unsecured creditors and subject to dilution by the rights offering, management incentive plan and warrants.

Holders of general unsecured claims would receive a share of the reorganized equity, subject to dilution by the rights offering, incentive plan and warrants.

Existing equity holders would receive five-year warrants representing 10% of the reorganized equity, as well as Black Scholes or ride-through protection in the event of a sale or merger.

The offshore oil and gas drilling contractor is based in Houston. The company filed bankruptcy on April 26 in the U.S. Bankruptcy Court for the Southern District of Texas under Chapter 11 case number 20-32307.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.