Schahin II Finance eyes $15 million new 8% PIK notes to add liquidity

By Wendy Van Sickle

Columbus, Ohio, Sept. 7 – Schahin II Finance Co. (SPV) Ltd. plans to issue $15 million of new 18-month 8% PIK notes under a Cayman scheme of arrangement, according to a press release.

The new series of notes would have a senior position over the issuer’s existing 5 7/8% notes due 2022 and will be available to holders of existing notes on a pro rata basis, subject to some conditions.

The new notes will be issued at a 7% original issue discount.

The rights of the existing notes will generally remain unchanged, but voting under the indenture will require a majority of holders of each series of notes.

If the drillship Sertao is sold before repayment of the new notes, holders will receive the greater of the PIK interest and 22% of the net proceeds from the sale of the vessel after payment of the new notes and costs.

The full amount of the new notes offering is being backstopped by some members of a steering committee of holders of the existing notes. Those backstop parties will be paid in new notes a backstop fee of 3% of the $15 million investment.

The company said the new notes will provide it with additional liquidity to continue to maintain the Sertao vessel and weather the industry downturn.

Earlier this year, the trustee of the existing notes, acting at the direction of a majority of the holders of the existing notes, obtained an order for the appraisement and sale of the Sertao in the English Admiralty Court.

A sealed tender auction was held, with bids due by June 12, but the bids received were well below the auction reserve price and, as such, did not result in a sale, according to the news release.

The liquidity provided by the new notes will allow the owner of the vessel, Dleif Drilling, LLC, which is a party to the indenture, to market the Sertao for sale in an improved industry environment in consultation with the steering committee.

Pareto Securities is continuing to actively market the rig to interested parties, the release says.

The Cayman scheme of arrangement is conditioned on creditor approval, sanction by the Cayman Court and being given effect by the U.S. Bankruptcy Court under a Chapter 15 proceeding to recognize the scheme in the United States.

“If the scheme is not approved and the new notes are not issued, there may not be sufficient liquidity to maintain the vessel going forward, which would likely result in a loss of value to holders of the existing notes,” the release states.

Based in Grand Cayman, Cayman Islands, the issuer is a special purpose limited liability company that is engaged in ultra-deepwater drillship financing in Brazil.

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