Paragon secures ‘definitive support’ from creditors for revised plan

By Caroline Salls

Pittsburgh, Aug. 10 – Paragon Offshore plc executed an amendment to its plan support agreement with 100% of the lenders under its senior secured revolving credit facility and holders of about 69% of the principal amount of its 6¾% senior unsecured notes due in July 2022 and 7¼% senior unsecured notes due in August 2024, according to a news release.

“We’re pleased that we’ve received definitive support for our revised plan,” president and chief executive officer Randall D. Stilley said in the release.

“Our next milestone is to seek approval of the supplement to our disclosure statement at our hearing on Aug. 16 before appearing before the court at the end of September to continue presenting our case.

“With the support of our bondholders and revolver lenders, we remain confident that our restructuring plan will be approved. Our goal is to emerge from Chapter 11 quickly as soon as we receive approval and turn our full attention once more to creating long-term shareholder value.”

Under the revised plan, the revolver will still be modified to include a $165 million cash paydown with the balance of $631 million converted to a term loan due in 2021 at an interest rate of Libor plus 450 basis points with a 1% Libor floor.

However, the company said a minimum liquidity covenant will be reduced to $103 million from $110 million and a holiday on the maximum net leverage ratio and the minimum interest coverage ratio covenants will be extended to the first quarter of 2019 when they will be reintroduced with a cushion versus downside sensitivity projections.

The bondholders will collectively receive $285 million of cash, or $60 million less than in the original plan.

Contingency payment provisions in the original plan for 2016 and 2017 have been eliminated under the revised plan. In exchange, Paragon will issue a $60 million note due 2021 to the bondholders, which will bear interest at 12% if paid in cash or equity, or 15% if paid in kind.

Additionally, the equity ownership of the bondholders will increase to 47% from 35%, which still allows existing shareholders to retain a majority of the equity in the company.

Also under the revised plan, a definitive settlement agreement between Paragon and Noble Corp. remains in place with modifications. Noble will provide direct bonding in fulfillment of the requirements necessary to challenge tax assessments in Mexico related to the Paragon business for the tax years 2005 through 2010.

In addition, in connection with the revised plan, Noble agreed that, in lieu of cash, Paragon may pay to Noble any taxes owed for Mexican taxes under a tax sharing agreement via a note up to a maximum value of $5 million, potentially enabling the company to preserve additional cash during the course of the downturn.

Paragon, a Houston-based provider of offshore drilling rigs, filed for bankruptcy on Feb. 14 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 16-10386.

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