Offshore driller Seadrill Ltd. (SDRL) has filed for Chapter 11 after striking a deal with its banks and a minority of bondholders to inject $1 billion of new capital and extend or convert into equity some $8 billion of loans.
Under the terms of the agreement, Bermuda-based Seadrill will receive $860 million in secured loans and a further $200 million from the sale of new equity. At the same time, bank lenders agreed to defer maturities on all secured credit facilities, totaling $5.7 billion, until 2020 and have re-written debt covenants. Seadrill will also ask unsecured creditors to convert $2.3 billion of unsecured bonds and other unsecured claims into a 15% equity stake in the company.
The restructuring agreement won the support of 97% of bank lenders and 40% of bondholders, according to Seadrill.
Seadrill shares were down 3.8% in premarket trading Wednesday, after gaining 17.64% Tuesday to close $0.229. At midday Wednesday, shares traded up 12.81%.
Current shareholders will be all but wiped out by a deal that will leave them with just 2% of the post-restructuring company. Hemen Holding Ltd, owned by Norwegian-born billionaire John Fredriksen and Seadrill's biggest shareholder, has given its support to the deal and agreed to "underpin" the new capital investment.
The prearranged Chapter 11 filing was lodged on Tuesday, Sept. 12, just two days before Seadrill was due to repay a $400 million credit facility on Sept. 14. The agreement concludes more than a year of talks with lenders, which followed a slump in oil prices and a corresponding drop in demand for drilling services that left Seadrill unable to finance the biggest debt burden in the offshore drilling sector.