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Seadrill outlines restructuring plan following Chapter 11 filing

Plan extends and re-profiles secured bank debt, reduces leverage and delivers $1.06 billion of new capital.





Updated on 13 Sep 2017 07:44 GMT

Seadrill Ltd confirmed on Tuesday that it has filed for Chapter 11 bankruptcy and entered into a restructuring agreement with more than 97 percent of its secured bank lenders, approximately 40 percent of its bondholders and a consortium of investors led by its largest shareholder, Hemen Holding Ltd.

The restructuring plan, which the company says was developed over the course of more than a year, extends and re-profiles the secured bank debt, reduces its financial leverage and delivers $1.06 billion of new capital, comprised of $860 million of secured notes and $200 million of equity.

The company's secured lending banks have agreed to defer maturities of all secured credit facilities, totalling $5.7 billion, by approximately five years, with no amortization payments until 2020 and significant covenant relief.

Additionally, assuming unsecured creditors support the plan, Seadrill's $2.3 billion of unsecured bonds and other unsecured claims will be converted into approximately 15 percent of the post-restructured equity with participation rights in both the new secured notes and equity, and holders of Seadrill common stock will receive approximately 2 percent of the post-restructured equity.

Chapter 11 cases were filed on Tuesday in the Southern District of Texas together with the restructuring plan. The company has also filed 'first day' motions that, if granted, will enable day-to-day operations to continue as usual.

Seadrill requested authority to pay its key trade creditors and employee wages and benefits without change or interruption. Additionally, the company expects it will pay all suppliers and vendors in full under normal terms for goods and services provided during the Chapter 11 cases.

As part of the restructuring process, Seadrill says it has ring-fenced its non-consolidated affiliates from the restructuring process, including Seadrill Partners LLC, SeaMex Ltd, Archer Ltd and their respective subsidiaries. These affiliates, whose individual financial statements are not included in the consolidated or combined financial statements of the parent company, did not file Chapter 11 cases, and Seadrill expects their business operations to continue uninterrupted.

At the time of filing, Seadrill says it had over $1 billion in cash and does not require debtor-in-possession financing.

Commenting on developments, Anton Dibowitz, CEO and President of Seadrill Management Ltd, said: "The restructuring agreement we signed today is a comprehensive plan that raises over $1 billion of new capital, is underpinned by Hemen Holding Ltd., our largest shareholder, and is overwhelmingly supported by our banks and approximately 40 percent of our bondholders.

"This is a testament to our position in the sector, having a large, modern fleet, a top-quality customer base and a proven operating track record. With our improved capital structure, we will be in a strong position to capitalise when the market recovers."

Kirkland & Ellis LLP will be serving as legal counsel during the Chapter 11 process, whilst Houlihan Lokey, Inc. has been engaged as financial advisor, and Alvarez & Marsal as restructuring advisor.

Slaughter and May has been acting as corporate counsel, and Morgan Stanley served as co-financial advisor during the negotiation of the restructuring agreement.






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