Seadrill New Finance emerges from bankruptcy as Paratus Energy Services

By Sarah Lizee

Olympia, Wash., Jan. 20 – Seadrill Ltd. subsidiary Seadrill New Finance Ltd. emerged from Chapter 11 bankruptcy on Thursday and will be renamed Paratus Energy Services Ltd., according to a press release.

As previously reported, the company’s one-day pre-packaged Chapter 11 plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas on Jan. 12.

Under the plan, post emergence the board of directors will consist of between three and five members, up to four of which will be appointed by noteholders, with the remaining director to be appointed by Seadrill Ltd.

On Thursday, a newly constituted board of directors was appointed, consisting of Mei Mei Chow, Jim LaChance, Matt Lyne and James Ayers. Sergio Delgado will initially act as an observer.

“The plan provides the issuer with financial and strategic flexibility and stability by amending and extending the issuer's secured notes, effectuating a transfer of majority ownership of the issuer from the wider Seadrill group to the secured noteholders, and facilitating the entry into management agreements with Seadrill for the continued provision of management services and operational support to the issuer and its subsidiaries,” the companies said in a press release issued after the confirmation hearing.

The one-day restructuring is the final component of the broader Seadrill group’s comprehensive restructuring efforts, Seadrill had said.

The Seadrill New Finance entities were established as part of the Seadrill Ltd. debtors’ first Chapter 11 restructuring as a set of holding companies that were wholly owned by the Seadrill Ltd. debtors.

On the effective date of Seadrill’s first restructuring in 2018, the Seadrill New Finance group issued $880 million of new secured notes in exchange for $875 million in cash. As collateral for the secured notes, the group granted security interests in various joint ventures and minority-owned companies.

At Seadrill New Finance’s petition date, there was $535 million in aggregate principal amount of secured notes outstanding externally.

With the consent of 99.99% of voting creditors by amount and sole shareholder, Seadrill Investment Holding Co. Ltd., the Seadrill New Finance entities filed their Chapter 11 cases to implement a restructuring of the notes.

The key terms of the plan include:

• The release by the holders of the issuer’s 12% senior secured notes due 2025 of all existing guarantees and security and claims, if any, with respect to Seadrill and its subsidiaries, excluding Seadrill New Finance and some of its subsidiaries;

• The noteholders receiving 65% of pro forma equity in the issuer, with Seadrill Investment Holding 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 the SeaMex group, 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;

• New notes will be issued pro rata to noteholders on amended terms, including a maturity date of July 15, 2026, interest of either 9%, consisting of 3% cash interest plus 6% PIK interest, or 10% PIK, in each case payable quarterly, and call protection of 105 on or after July 15, 2021, 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; and

• Seadrill will continue to provide certain management services to the issuer’s group, with resolution and commercial agreement on payment of go-forward management fees.

Only one creditor holding about $22,000 in secured notes voted to reject the plan, whereas around 79.46% by principal amount of impaired creditors submitted ballots in favor of the plan.

The company said the plan doesn’t impair any stakeholders other than those that have overwhelmingly voted in favor of the plan, including Seadrill and the secured noteholders.

Kirkland & Ellis LLP and Slaughter and May are serving as legal advisers to the issuer in connection with the restructuring. Akin Gump Strauss Hauer & Feld are serving as legal advisers to an ad hoc group of the noteholders, and Ducera Partners LLC is serving as the ad hoc group’s financial adviser.

Seadrill said the actions are not expected to impact the recoveries existing shareholders of Seadrill Ltd. will receive under the Seadrill Ltd. plan, which was confirmed on Oct. 26, as previously reported.

London-based offshore drilling company Seadrill Ltd. filed Chapter 11 bankruptcy on Feb. 7, 2021 under case number 21-30427. The Seadrill New Finance entities jointly filed bankruptcy on Jan. 11 under case number 22-90001.

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