Noble Shares Tumble 7% after Paragon Abandons Settlement

The U.S.-listed shares of London-based offshore drilling contractor Noble (NE)  fell 7% Monday after the company announced bankrupt offshore driller Paragon Offshore plc had abandoned a settlement agreement between the companies relating to the August 2014 spin-off of Paragon by Noble. 

Paragon on April 2 filed an updated disclosure statement and a revised plan of reorganization in its bankruptcy proceeding in which it said it no longer would seek approval of a settlement agreement between it and Noble.

As a part of its previous pre-negotiated plan, Paragon entered into a settlement agreement with Noble under which, in exchange for a release of any and all claims that Paragon might have in connection with the spinoff, including fraudulent conveyance claims that could be brought on behalf of Paragon's creditors, Noble agreed to provide certain bonding required in connection with Paragon's Mexican tax obligations, in addition to assuming the administration of Mexican tax claims against Paragon for specified years and certain other obligations. 

Under the bankruptcy company's new plan, however, Paragon will no longer need the Mexican tax bonding, which was a key benefit of the settlement agreement for Paragon. 

As a result, Paragon terminated the settlement effective April 21 and said it might pursue claims against Noble. 

In a separate statement submitted to the Securities and Exchange Commission on April 21, Noble said it continues to discuss its continuing relationship with Paragon, including the possibility of entering into a new settlement agreement.

The company said, however, that there can be no assurance it will reach any settlement agreement with Paragon. Noble warned that if it does not enter into a settlement agreement with Paragon, it expects Paragon or its creditors would pursue claims against Noble in litigation relating to the spin-off, including any alleged fraudulent conveyance claims.

Noble further said it continues to believe that Paragon, at the time of the spinoff, was adequately funded, solvent, and with appropriate liquidity and that any fraudulent conveyance claim or other claim related to the spinoff that may be brought by Paragon or its creditors would be without merit and would be contested vigorously by Noble.

Paragon filed for bankruptcy on Feb. 14 after missing an interest payment on its 6.75% notes. The Houston debtor listed $2.47 billion in assets and $2.96 billion in liabilities in its petition. Debtor counsel Gary T. Holtzer of Weil Gotshal & Manges LLP did not immediately respond to a request for comment Monday.

Under Paragon's revised plan, lenders holding secured claims on a term loan and revolving credit agreement would receive a pro rata share of cash collateral, $352 million in cash and $85 million in take-back debt for an estimated 31% recovery. 

General unsecured creditors, including $642 million in term loan claims and $777 million in revolver claims, would split the reorganized company's equity and cash remaining after funding a reserve. Paragon estimated the creditors would recover 23% to 28% on their claims, not including any recovery on claims against Noble.

Holders of priority nontax and other secured claims, each owed up to $150,000, would receive full payment in cash. 

Subordinated claims and existing equity interests would be wiped out.

Stephen A. Youngman and Alfredo R. Perez of Weil and Mark D. Collins and Amanda R. Steele of Richards, Layton & Finger PA are also debtor counsel.

Sandeep Qusba and Kathrine A. McLendon of Simpson Thacher & Bartlett LLP and Adam G. Landis and Kerri K. Mumford of Landis Rath & Cobb LLP represent the revolving credit facility agent and steering committee of revolving lenders.

Madlyn Gleich Primoff, Mark F. Liscio, Scott Talmadge and Benjamin Mintz of Arnold & Porter Kaye Scholer LLP and Jeremy W. Ryan and Ryan M. Murphy of Potter Anderson & Corroon LLP represent the term loan agent and ad hoc committee of term loan lenders.

Andrew N. Rosenberg and Elizabeth R. McColm of Paul Weiss Rifkind Wharton & Garrison LLP and Pauline K. Morgan of Young Conaway Stargatt & Taylor LLP represent the creditors' committee.

--Kirk O'Neil contributed to this report. 

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