Seadrill Limited filed for bankruptcy protection on Wednesday after the company's senior officials figured out a strategy to inject the company with $1 billion in new funds, according to a new report by Bloomberg.
Billionaire John Fredriksen controls the company, but the venture is deeply in debt-debt which will now not mature until 2020. If lower-ranking lenders join in, it could raise $2.3 billion in unsecured bonds, which could convert to a maximum of a 15 percent equity stake in the offshore driller.
"The deal gives us a great liquidity cushion," allowing Seadrill to survive the "mother of all downturns," CEO Anton Dibowitz told Bloomberg over the phone. Fredriksen's investment company, Hemen Holding Ltd., along with Centerbridge Partners-would together supply the new $1 billion in capital, which would consist of $860 million in secured notes and $200 million in equity. So far, 40 percent of bondholders and 97 percent of the company's secured lenders support the plan.
If the plan works, Seadrill should be out of Chapter 11 in six to nine months, by which time investors and oil experts expect oil prices to be closer to recovery.
"We are excited to invest alongside Hemen," Jed Hart of Centerbridge Partners Europe, which will be in the restructuring deal, said in an email. "We view Seadrill as a high-quality, global business with a top-tier employee base that will be well positioned when the industry recovers."
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Other analysts are concerned that the Chapter 11 process will be difficult, reducing the likelihood that existing stakeholders will benefit from the deal to any great extent.
"We see significant risk of the final words not being said yet and the Chapter 11 process might be a long and painful process," analysts said in a note by Clarksons Platou Securities AS.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More