Paragon Offshore is planning to file for bankruptcy this week in a deal that will eliminate more than US$1.1 billion of debt and reduce annual cash interest payments by nearly $60 million.
 |
|
Image from Paragon. |
The company entered into a plan support agreement (PSA) composed of about 77% in the aggregate of holders of Paragon's 6.75% senior unsecured notes maturing July 2022 and 7.25% senior unsecured notes maturing August 2024 to support a restructuring of Paragon's balance sheet, the company said in a statement.
According to the terms of the PSA, the company will significantly reduce its debt and receive certain covenant relief, positioning Paragon for long-term growth and success. It will also help the company preserve the majority of its ownership for existing equity holders.
Paragon shareholders will exchange $984 million in senior unsecured notes for $345 million in cash plus 35% of equity, and they may receive deferred cash payments of up to $50 million based upon 2016 and 2017 consolidated EBITDA results.
The company's revolving load, which matures in 2019, will be paid down to $165 million.
"With the help of our advisors and under the direction of an independent committee of our board of directors, the transaction, once implemented, will allow Paragon to eliminate more than $1.1 billion of debt and reduce annual cash interest payments by nearly $60 million, substantially increasing the strength of the company's balance sheet,” Randall D. Stilley, Paragon president and CEO said. “We believe that successful completion of our financial restructuring will lead to an improved competitive stance, maintaining our status as the high-quality, low-cost drilling contractor and positioning Paragon for long-term growth and success.”
Paragon is expected to continue to operate as usual, paying its employees and vendors in the normal course.
Paragon also entered into a deal with Noble Corp., that says once the settlement agreement becomes effective, Paragon would release Noble from all claims relating to the spin-off of Paragon by Noble in 2014, including any fraudulent conveyance claim that could be brought on behalf of Paragon's creditors, and Noble would assume certain pre-spin-off obligations relating to Paragon's Mexican tax matters, according to Noble Corp.
In exchange, Noble would take control of the administration and defense of Paragon's Mexican income, value-added and customs tax audit and assessment matters for specified years up to and including 2010.
"Like many companies, Paragon has been hard hit by the unanticipated deterioration in oil prices that has persisted into 2016. Noble established Paragon in a manner it believed would allow Paragon to fully succeed and believes this proposed restructuring will assist Paragon in its efforts to manage this unforeseen, severe downturn,” David W. Williams, chairman, president and CEO of Noble Corp. said. “We are pleased to have found a way to constructively engage with Paragon in a manner that can assist them in their restructuring efforts, while at the same time reaching an arrangement that avoids the distraction and expense of the litigation, regardless of merit, that would otherwise inevitably follow a bankruptcy filing by Paragon.”
Subscribe
