Latest On Seadrill Restructuring

Here are some thoughts from Chris Hughes on the Seadrill restructuring:

The left-behind bondholders are a fragmented bunch of institutions and retail investors. While bigger by weight, they couldn't mobilize to the same effect.

The bankruptcy court can impose this plan on bondholders even if they vote it down. To be sure of a better deal, they need an alternative plan for injecting $1.1 billion in partnership with Fredriksen. But it's hard to see them dislodging Centerbridge.

Their most realistic bet may be to gum up the process in litigation. Seadrill would doubtless prefer their support and so may tweak the terms. A sweetener could come from giving the disgruntled bondholders more than just a nibble at the fundraising. The 2 percent of equity being kept for the existing shareholders is another source of top-up. Despite this possibility, the shares are currently worth $188 million, implying a ridiculous $10 billion valuation for the equity post restructuring, and demonstrating how unreliable the stock market can be in a bankruptcy.

The losing bondholders may as well fight. But they need to remember that the spoils of restructurings tend to go to those who start punching at the beginning, not the end.

The "losing" bondholders may be low energy, but they outnumber the plan-supporting bondholders 60-40.