Seadrill New Finance further updates on restructuring, SeaMex JV

By Sarah Lizee

Olympia, Wash., July 2 – Seadrill Ltd. gave an update on the restructuring discussions for the 12% senior secured notes due 2025 issued by Seadrill New Finance Ltd. in a press release Friday morning.

The issuer and some of its subsidiaries agreed on Friday to key commercial terms for a comprehensive restructuring of the issuer and entered into a restructuring support agreement with about 79% of noteholders.

The parties have also reached agreement on the terms of a restructuring proposal in relation to the business and assets of SeaMex Ltd., a 50/50 joint venture entered into by one of the issuer's subsidiaries, Seadrill JU Newco Bermuda Ltd.

Seadrill also announced a proposed consent solicitation process to amend some provisions of the indenture governing the notes.

Restructuring of the issuer

The key terms of the restructuring include the release by noteholders of all existing guarantees and security and claims with respect to Seadrill and its subsidiaries, excluding the issuer and its subsidiaries.

Noteholders will receive 65% of pro forma equity in the issuer, with Seadrill Investment Holding Co., a subsidiary of Seadrill Ltd., retaining the remaining 35% of pro forma equity in the issuer, which will effect a separation of the issuer and its subsidiaries, including the Seabras Sapura assets and SeaMex assets, from the consolidated Seadrill group.

Noteholders will have appointment rights in respect of four out of five of the issuer's directors on the board of the restructured issuer's group, with the remaining director to be appointed by Seadrill Ltd.

The notes will remain in place with amended terms, including a maturity date of July 15, 2026 and interest of either 9%, payable 3% in cash and 6% in kind, or 10% in kind, in each case payable quarterly.

Call protection includes a redemption price of 105 on or after July 15, 102 on or after July 15, 2022, and par on or after July 15, 2023.

Noteholders will have a first priority right to fund any additional liquidity needs of the issuer or its affiliates, including working capital support, and up to $15 million of new super senior debt to provide further funding to the SeaMex business if required.

Seadrill said it will continue to provide management services to the issuer's group, and operate the SeaMex assets, with resolution and commercial agreement on payment of historic and go forward management fees.

The restructuring of the issuer may be implemented out of court or through a court supervised process, the latter likely involving a pre-packaged Chapter 11 process.

The issuer and the consenting noteholders intend to engage with other noteholders in order to invite them to execute the RSA and support the restructuring, Seadrill said. This will allow those noteholders who enter into the RSA to participate in the next stage of the restructuring process, and in the event that enough noteholders enter into the RSA, will enable the restructuring to be implemented through an out-of-court process that should reduce the time and costs that would otherwise be involved in a court supervised process.

Under the RSA, the consenting noteholders have also agreed to forbear from exercising enforcement rights or otherwise take actions against the issuer and any subsidiary of the issuer which is an obligor under the notes in respect of certain events of default that may arise under the notes, including in respect of the issuer not making the semiannual cash interest payments due to the noteholders on Jan. 15 and July 15, until the earlier of the completion of the restructuring transactions and termination of the RSA.

The RSA anticipates that the restructuring of the issuer will be launched by Aug. 6 and completed as soon as reasonably practicable thereafter, with a long-stop date of Sept. 30.

As of June 28, the issuer's cash balance was about $50.5 million.

SeaMex restructuring

On June 18, John C. McKenna of Finance & Risk Services Ltd. and Simon Appell of AlixPartners UK LLP were appointed as joint provisional liquidators over SeaMex by an order of the Supreme Court of Bermuda.

The joint venture agreement governing the SeaMex joint venture was terminated with immediate effect.

Under the RSA, the parties agreed to the terms of a restructuring proposal in respect of the business and assets of SeaMex.

The key terms of the proposal include a refinancing of the SeaMex senior secured bank debt by the issuance of new senior secured notes, and an offer to purchase the assets of SeaMex out of provisional liquidation, in exchange for the release of all or substantially all of the subordinated debt owed by SeaMex and some of its subsidiaries to the issuer and some subsidiaries of the issuer, and a novation of SeaMex's guarantee of the senior bank debt.

An independent valuation of the SeaMex group has been obtained and the joint provisional liquidators are conducting an accelerated market testing process in respect of SeaMex, to ensure that any proposed transaction maximizes value for creditors as a whole when compared to alternative options that may be capable of implementation.

Some noteholders are now the holders of the entire senior secured bank debt borrowed by some subsidiaries of SeaMex, and the RSA also provides for their support in that capacity, for the restructuring of SeaMex and the issuer.

The issuer intends to continue to engage in a constructive dialogue with SeaMex's key customer, Pemex Exploracion y Produccion, in relation to the recovery of historic unpaid invoices, including about $245 million which have been issued but remain unpaid, and potential amendments to the terms of SeaMex's contracts with Pemex.

The existing drilling contracts with Pemex have contract terms until between October 2024 and November 2026 assuming that they run to full term.

In the meantime, the issuer has obtained the requisite agreement from noteholders to obtain access to funds in the issuer's mandatory offer holding account as may be required to ensure that the SeaMex group has continued access to funding, and is proposing to launch a consent solicitation process to formalize the requisite amendments to the indenture governing the notes.

Consent solicitation

The proposed amendment changes some terms and covenants of the indenture to allow the issuer to use net realization proceeds as of the date of the proposed amendment to the indenture that have not previously been deemed to constitute “excess proceeds.”

The funds will be used for reorganization expenses of the issuer and to advance funds by way of loans to SeaMex and its successors and its and their respective subsidiaries to meet their ongoing operating and administrative needs, including operating disbursements, personnel costs, personnel taxes, direct and indirect taxes, debt service, and other costs and expenses.

The required majority of noteholders representing greater than 50% of the aggregate principal amount outstanding have agreed to provide consent to the proposed amendment.

The consent solicitation will expire at 5 p.m. ET on July 9.

Seabras Sapura

Seabras Sapura is a group of related companies that own and operate six pipe-laying service vessels in Brazil. The issuer has a 50% ownership stake in each of these companies, with the remaining 50% interest owned by Sapura Energy Bhd.

RSA participation

Noteholders wishing to accede to the RSA are invited to contact the issuer's counsel, Slaughter and May, at projectparatussmteam@slaughterandmay.com.

London-based Seadrill owns, operates and acquires offshore drilling rigs. Seadrill Partners and Seadrill Ltd. made their Chapter 11 bankruptcy filings on Dec. 1, 2020 under case number 20-35740 and Feb. 7, 2021 under case number 21-30427, respectively.

© 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.