Seadrill gets commitments for $225 million five-year secured revolver

By William Gullotti

Buffalo, N.Y., July 11 – Seadrill Ltd., via newly formed subsidiary Seadrill Finance Ltd., entered into a senior secured five-year revolving credit facility that provides for commitments permitting borrowings of up to $225 million with J.P. Morgan SE as administrative agent, according to a 6-K filing with the Securities and Exchange Commission and additional information included in a press release on Tuesday.

The revolver includes an accordion feature of up to $100 million and a $50 million sublimit for letters of credit.

Borrowings are unconditionally guaranteed, on a joint and several basis, by the parent company and its direct and indirect subsidiaries. The obligations are secured by senior priority liens on substantially all assets and equity interests of each party, including rigs and a percentage of the revenue derived from them.

The facility’s tenor may be shortened to four years, subject to certain financial tests. The commitments under the new revolver will become available to be borrowed upon the satisfaction of several various conditions.

The conditions include:

• The consummation of its Regulation S and Rule 144A offering of $450 million senior secured second lien notes;

• The redemption or discharge of all company obligations under the super senior term and revolving facilities agreement and the senior secured credit facility agreement, both dated Feb. 22, 2022 in connection with Seadrill’s Chapter 11 plan of reorganization; and

• After giving effect to any such borrowings and the application of borrowing proceeds, the aggregate amount of available cash would not exceed $250 million.

Borrowings will bear interest at SOFR plus 10 basis points plus an additional margin ranging from 250 bps to 350 bps as determined by the company’s credit ratings. The initial margin is set at 275 bps.

If an event of default occurs, the interest rate will be subject to a 200 bps increase.

There is also a 50 bps commitment fee, paid quarterly on the unused portion of the revolver, for the first three years. The fee steps up to 75 bps after three years and steps up again to 100 bps after the fourth year.

Seadrill is also required to pay customary letter of credit and fronting fees.

In addition to customary covenants for this type of financing, the company is further required to maintain a minimum interest coverage ratio of no less than 2.5 to 1.0 and a consolidated total net leverage ratio of no greater than 3.0 to 1.0.

Mandatory prepayments and, under certain circumstances, commitment reductions are required under the facility in connection with certain asset sales, asset swaps, and events of loss (subject to reinvestment rights if no event of default exists). Available cash in excess of $250 million at the end of any month must also be applied to prepay loans (without a commitment reduction). The loans under the revolver may be voluntarily prepaid, and the commitments thereunder voluntarily terminated or reduced, by Seadrill Finance at any time without premium or penalty, other than customary breakage costs.

J.P. Morgan Securities plc is the global coordinator and bookrunner, also acting as a joint lead arranger along with Citibank NA, London Branch, Deutsche Bank Securities Inc. and DNB Bank ASA.

GLAS Trust Company LLC is the common security agent.

Hamilton, Bermuda-based Seadrill Ltd. owns and operates offshore drilling rigs.

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