Tuesday, September 12, 2017

Seadrill Announces Comprehensive Restructuring Plan

Interesting, their opening proposal is to violate absolute priority and throw equity a little bone.

Seadrill Limited ("Seadrill" or the "Company") has 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 agreement 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, 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 agreed plan comprehensively addresses Seadrill's liabilities, including funded debt and other obligations. For additional information please refer to the Company's Form 6K filed along with this announcement.
The unsecured debt appears to be trading at ~30 cents on the dollar. So that values $2.3 billion of unsecured debt at $690 million. (Which seems unrealistically high; I'm not sure that people really think there be a 30 cent recovery.) If that is going to become 15% of the reorg equity, then the reorg equity is worth $4.6 billion. (Seems crazy.) If that's true, and the current equity is getting 2% of reorg equity, then the current equity is worth $92 million.

Current market cap is $115 million.


CP said...

Only 40% bondholder support is weak...

Anonymous said...

This could be a LONG, drawn out battle with equity moving all over the place. A lot of people want to cover their equity short because of this.

Anonymous said...

The entities putting in the additional capital are the ones who own the 40% of the unsecureds!

The proposal subsequently developed into a $1.06 billion commitment (the “Capital Commitment”) backed not only by Hemen and Centerbridge, but also by a syndicate of additional investors (the “Syndication Parties,” together with Hemen and Centerbridge, the “Commitment Parties”). The Syndication Parties hold approximately 30 percent of the Debtors’ approximately $2.3 billion in outstanding unsecured bonds (the “Unsecured Bonds”). The Commitment Parties (i.e., including Hemen and Centerbridge) hold approximately 40 percent of the Unsecured Bonds. The Commitment Parties and the Bank Lenders agree that a substantial capital injection is key to a successful restructuring.

Anonymous said...

Equity Extinguishment. Under the Restructuring Support Agreement, so long as
holders of unsecured claims at Seadrill Limited vote as a class to accept the Debtors’ chapter 11 plan, holders of existing equity interests in Seadrill Limited will receive their pro rata share of 2 percent of the new equity in reorganized Seadrill Limited.

Anonymous said...

Current shareholders may end up with as little as 3 to 4 cents a share, while unsecured bondholders may see a direct recovery for unsecured claims of about 6 percent if they don’t participate in new secured debt, analysts at Clarksons Platou Securities AS wrote in a note.

“We see significant risk of the final words not being said yet and the Chapter 11 process might be a long and painful process,” the analysts said.


Anonymous said...

Presentation: https://www.sec.gov/Archives/edgar/data/1351413/000119312517283179/d451092dex101.htm

RSA: https://www.sec.gov/Archives/edgar/data/1351413/000119312517283179/d451092dex102.htm

Anonymous said...

CreditSights analyst Roger King did the math and reports late Wednesday that the recovery rate to bondholders in the bankruptcy plan is just 4.7%. He writes:

$2,297 million unsecured bonds and $280 million estimated derivative contract claims share 15% new equity, and $200 million cash buys 25% new equity for an $800 million "market cap".


Anonymous said...

"John Fredriksen Chucks His Seadrill Bond Crew Overboard"

A separate $200 million equity injection hints at what the new investors think this equity might be worth. This is for 24 percent of Seadrill. Suppose this cash call was priced at a 60 percent discount -- consistent with the distressed state of affairs -- then 100 percent of the equity would be worth $2.1 billion.

Now consider the sorry holders of $2.3 billion of bonds. The restructuring plan torches their securities and gives them a 14 percent equity stake, worth about $300 million on the above valuation. There's a painful gulf there. Less than half of bondholders have agreed to the deal. It's not clear what the rest think at this stage.

The remaining equity holders keep the last 2 percent of the company. Bondholders will be livid shareholders get anything at all.

Anonymous said...

Seadrill Creditor Group is Said to Organize to Oppose Debt Plan
Bondholders are outside of ad hoc group of creditors who support plan, said the people, who asked not to be named because the discussions are private
Group is looking to hire financial and legal advisers
Without participation in new secured debt, unsecured claims have an estimated recovery of ~6%

Anonymous said...

Stock on fire today with heavy volume.