Oslo-listed offshore drilling contractor Seadrill has filed for bankruptcy protection at a federal court in Texas, marking the start of its second round of Chapter 11 protection in four years’ time.
Five of Seadrill’s Asian subsidiaries filed for bankruptcy protection in the Southern District of Texas early this week. On Wednesday, the company’s board announced that Seadrill itself and most of its consolidated subsidiaries had filed for Chapter 11, with exeptions for Seadrill New Finance Limited and a dozen other units.
The first-day filings ask the court to give the company continued authority to pay its trade creditors and its employees. The firm says that it has $650 million in cash on hand and expects to meet its normal obligations to its workforce and its vendors without interruption during the bankruptcy proceedings.
The Chapter 11 cases are aimed at achieving continued operations for Seadrill’s fleet through a balance sheet restructuring. The company expects that this will result in a large debt-for-equity swap, which is “likely to result in minimal or no recovery for current shareholders.” Seadrill is a Bermuda-registered company, and Bermuda’s courts will likely have an oversight role in the proceedings.
“This announcement marks the start of the court supervised process that will create a company that is financially sustainable for the long term. We are working closely with our stakeholders to ensure we achieve an outcome that gives us the flexibility to weather the low points in our industry cycles, whilst positioning us well for market recovery,” said Stuart Jackson, Seadrill’s CEO. “I would like to thank all our stakeholders for their continued support as we move through this legal process, in particular, our customers, vendors and employees, all of whom demonstrate continued support.”
Seadrill reached a series of forbearance agreements with its largest creditors last year, but the last one expired on January 29. It had sought to obtain consent from several of its bankers to delay payments on $5.7 billion out of its total $7.3 billion in debt. Most of that debt will likely be converted into equity, wiping out existing shareholders.
Seadrill last filed for bankruptcy in 2017, nearly wiping out its shareholders in a prepackaged deal that gave the company $1 billion in new financing and relieved it of $2.4 billion in unsecured bond debt. An additional $5.7 billion in bank loans saw their maturity dates pushed back until 2022.
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