Seadrill Announces Confirmation of Pre-Packaged Financial Restructuring

Source: 1/12/2022, Location: South America

Seadrill Limited (“Seadrill”) (SDRLF) and the Issuer announce that the Issuer has successfully received approval from the U.S. Bankruptcy Court for the Southern District of Texas (the “Court”) for its “one-day” chapter 11 restructuring. The Court confirmed the Issuer’s chapter 11 plan of reorganization (the “Plan”), which received nearly unanimous support from existing stakeholders. The Plan provides the Issuer with financial and strategic flexibility and stability by amending and extending the Issuer’s secured notes, effectuating a transfer of majority ownership of the Issuer from the wider Seadrill group to the secured noteholders, and facilitating the entry into management agreements with Seadrill for the continued provision of management services and operational support to the Issuer and its subsidiaries. The Plan also provides for the satisfaction of all trade, customer, and other non-funded debt claims in full in the ordinary course of business. Benefitting from both the new ownership structure and the continuity provided by the Seadrill group, the Issuer expects to continue to focus on maximizing value for all stakeholders from its portfolio of investments including the Seabras Sapura JV and the SeaMex group.

The key terms of the Plan include:

- the release by the holders of the Issuer’s 12.0% Senior Secured Notes due 2025 (the “Noteholders” and the “Notes”, respectively) of all existing guarantees and security and claims (if any) with respect to Seadrill and its subsidiaries (excluding the Issuer and certain of its subsidiaries);

- the Noteholders receiving 65% of pro forma equity in the Issuer, with Seadrill Investment Holding Company (a subsidiary of Seadrill) retaining the remaining 35% of pro forma equity in the Issuer, which shall effect a separation of the Issuer and its subsidiaries (including the Seabras Sapura assets and the SeaMex group) from the consolidated Seadrill group;

- the Noteholders will have appointment rights in respect of 4 out of 5 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:
- maturity date: July 15, 2026
- interest: either (a) 9.0%, consisting of (i) 3.00% cash interest plus (ii) 6.00% PIK interest, or (b) 10.0% PIK, in each case payable quarterly
- call protection: redemption price:
- prior to July 15, 2022: 105%
- on or after July 15, 2022: 102%
- on July 15, 2023 and thereafter: 100%;
- the 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.

Confirmation of the Issuer’s Plan brings the Seadrill group one step closer to finalizing the comprehensive restructuring of the Seadrill group. The Issuer expects to emerge from chapter 11 in the near term. Seadrill’s chapter 11 plan of reorganization was confirmed by the Court in October 2021 and is anticipated to go effective in the first quarter of 2022.

Kirkland & Ellis LLP and Slaughter and May are serving as legal advisors to the Issuer in connection with the restructuring. Akin Gump Strauss Hauer & Feld are serving as legal advisors to an ad hoc group of the Noteholders (the “Ad Hoc Group”), and Ducera Partners LLC are serving as the Ad Hoc Group’s financial adviser.

This announcement relates to Seadrill New Finance Limited and is not expected to impact the recoveries existing shareholders of Seadrill Limited will receive under the Seadrill Limited Plan. Consummation of the Seadrill Limited Plan is subject to a number of customary terms and conditions, including court approval, which was obtained on October 26, 2021.

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