Seadrill unit files for and emerges from bankruptcy

March 2022 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

March 2022 Issue

A unit of offshore driller Seadrill Ltd – Seadrill New Finance – filed for Chapter 11 bankruptcy in January. The unit also submitted a fast-tracked reorganisation plan in Houston bankruptcy court and has subsequently emerged from bankruptcy protection.

The plan was confirmed by the US Bankruptcy Court for the Southern District of Texas on 12 January 2022. All conditions precedent to the restructuring contemplated by the plan have been satisfied or otherwise waived, Seadrill said in a statement. According to the company, Seadrill New Finance Limited will be renamed Paratus Energy Services Ltd.

“The plan, which received support from an overwhelming majority of existing stakeholders, provides the Issuer with financial and strategic flexibility and stability. Benefitting from both the new ownership structure and the continuity provided by the Seadrill group, the Issuer expects to continue to focus on maximizing value for all stakeholders from its portfolio of investments including the Seabras Sapura JV and the SeaMex group,” Seadrill said in a statement.

Post-emergence, the board of directors of Paratus Energy Services will consist of between three and five members, up to four of whom will be nominated by the unit’s noteholders, with the remaining director to be appointed by Seadrill. As such, a newly constituted board of directors of Seadrill New Finance has been appointed, consisting of Mei Mei Chow, Jim LaChance, Matt Lyne and James Ayers. Sergio Delgado will initially act as an observer.

Seadrill New Finance serves as a holding company for a joint venture with an investment fund controlled by Fintech Holdings Ltd. The joint venture, SeaMex Ltd, holds five rigs in Mexico and underwent a restructuring in 2021 after state-owned petroleum company Pemex, a top customer, failed to pay up. Under the proposed plan, secured noteholders will take over most of the equity in Seadrill New Finance.

Key terms of the plan include: (i) the release by the holders of the issuer’s 12 percent senior secured notes due in 2025 of all existing guarantees and security and claims (if any) with respect to Seadrill and its subsidiaries (excluding the issuer and certain of its subsidiaries); (ii) the noteholders receiving 65 percent of pro forma equity in the issuer, with Seadrill Investment Holding Company retaining the remaining 35 percent 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; and (iii) giving the noteholders 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.

Seadrill Ltd itself went through bankruptcy in 2018, emerging with billions of dollars shed from its debt stack and $1bn in new investments. The company returned to Chapter 11 in 2021, blaming the sustained downturn in the oil & gas market and the economic impact of the coronavirus (COVID-19) pandemic. The company’s most recent stint in bankruptcy protection sought to reduce the company’s debt pile of $5.6bn by $4.9bn. Seadrill’s Chapter 11 plan of reorganisation was confirmed by the court in October 2021 and is anticipated to go effective in the first quarter of 2022.

The bankruptcy is not expected to impact the recoveries existing shareholders will receive under the Seadrill Limited plan. Moving forward, Seadrill or its subsidiaries will continue to provide certain management services to Paratus Energy Services.

Richard Summerfield