Seadrill New Finance opens pre-packaged Chapter 11 plan solicitation

By Sarah Lizee

Olympia, Wash., Dec. 8 – Seadrill Ltd. and issuer Seadrill New Finance Ltd. announced the launch of voting solicitation in relation to Seadrill New Finance’s Chapter 11 plan of reorganization.

Following solicitation, the issuer and some of its subsidiaries intend to file pre-packaged Chapter 11 cases in the U.S. Bankruptcy Court for the Southern District of Texas and seek approval of the plan.

The key terms of the plan include:

• The release by the holders of the issuer’s 12% senior secured notes due 2025 of all existing guarantees and security and claims, if any, with respect to Seadrill and its subsidiaries, excluding Seadrill New Finance and some of its subsidiaries;

• The noteholders receiving 65% of pro forma equity in the issuer, with Seadrill Investment Holding Co., a subsidiary of Seadrill, retaining the remaining 35% 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;

• Noteholders will have 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;

• New notes will be issued pro rata to noteholders on amended terms, including a maturity date of July 15, 2026, interest of either 9%, consisting of 3% cash interest plus 6% PIK interest, or 10% PIK, in each case payable quarterly, and call protection of 105 on or after July 15, 2021, 102 on or after July 15, 2022, and par on or after July 15, 2023;

• Noteholders will have a first priority right to fund any additional liquidity needs of the issuer or its affiliates; and

• Seadrill will continue to provide certain management services to the issuer’s group, with resolution and commercial agreement on payment of go-forward management fees.

The key commercial terms of the plan have support from roughly 81.8% of the noteholders, under a restructuring support agreement dated July 2.

As such, and given the pre-packaged nature of the Chapter 11 cases, the issuer expects to emerge from Chapter 11 shortly after filing.

The issuer and its subsidiaries intend to operate in the normal course of business during the expedited Chapter 11 process.

The voting deadline and the deadline for submission of the registration form to enable noteholders to receive their pro rata distribution of equity in the issuer on or shortly after the effective date of the plan, is 5 p.m. ET on Jan. 7.

Kirkland & Ellis LLP and Slaughter and May are serving as legal advisers to the issuer in connection with the restructuring. Akin Gump Strauss Hauer & Feld are serving as legal advisers to an ad hoc group of the noteholders, and Ducera Partners LLC is serving as the ad hoc group’s financial adviser.

Seadrill said the actions are not expected to impact the recoveries existing shareholders of Seadrill Ltd. will receive under the Seadrill Ltd. plan, which was confirmed on Oct. 26, as previously reported.

London-based offshore drilling company Seadrill Ltd. filed Chapter 11 bankruptcy on Feb. 7, 2021 under case number 21-30427.

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