Seadrill Files for Bankruptcy After Securing Deal with Lenders

Seadrill (SDRL) said late Tuesday that it and certain of its subsidiaries, which include North Atlantic Drilling (NADL), has filed for chapter 11 bankruptcy after entering into a restructuring agreement with more than 97% of its secured bank lenders.

The company said the restructuring agreement includes $1.06 billion of new capital comprised of $860 million of secured notes and $200 million of equity.

The lenders have agreed to defer maturities of all secured credit facilities, totaling $5.7 billion, by approximately five years with no amortization payments until 2020 and significant covenant relief.

“Additionally, assuming unsecured creditors support the plan, the company’s $2.3 billion of unsecured bonds and other unsecured claims will be converted into approximately 15% 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% of the post-restructured equity,” the firm said.

Seadrill said the deal ensures it can continue to operate its fleet of drilling units.

“Post-restructuring, Seadrill will have a strong cash position and good liquidity to take advantage when the market recovers,” the company said.

Separately, Ship Finance International Limited (SFL) said it and certain of its subsidiaries entered into a restructuring agreement in connection Seadrill’s restructuring. Ship Finance said it and three of its subsidiaries, who own and lease the drilling rigs West Linus, West Hercules and West Taurus to Seadrill, have also entered into the restructuring agreement.

“As part of the restructuring plan, Ship Finance and its relevant subsidiaries have agreed to reduce the contractual charter hire by approximately 30% for a 5-year period starting in 2018, with the reduced amounts added back in the period thereafter,” Ship Finance said. “The leases for West Hercules and West Taurus will also be extended for a period of 13 months until December 2024.”

Concurrently, Ship Finance said, the banks who finance the three rigs have agreed to extend the loan period by approximately four years, with reduced amortization in the extension period compared to today’s level.

“The net cash flow from the three rigs in the extension period is estimated to approximately $29 million per year, or approximately $0.08 per share per quarter, net of loan interest and amortization,” Ship Finance said.

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