Seadrill Suspends Debt Payments as Restructuring Talks Continue

Terje Solsvik
Wednesday, September 16, 2020

A group of Seadrill's creditors has agreed to let the offshore drilling rig operator suspend interest payments this month as part of an ongoing effort to restructure its $7.3 billion debt, the Oslo-listed company said on Wednesday.

Seadrill, which has so far failed to convince its 43 bank lenders to permanently adjust the terms of its loans, reiterated earlier warnings that a debt restructuring could leave current shareholders with minimal or no ownership at all.

Demand for oil and gas exploration and drilling has fallen further during the COVID-19 pandemic as energy firms seek to preserve cash, idling more rigs and leading to additional overcapacity among companies serving the industry.

"The company continues to evaluate capital structure proposals from its financial stakeholders," said Seadrill, which is controlled by Norwegian-born tycoon John Fredriksen.

The so-called forbearance agreement lasts until Sept. 29 but could be extended.

"The consenting creditors have agreed not to exercise any voting rights to, or otherwise take actions, in respect of certain events of default that may arise," Seadrill said in a statement.

The deal announced on Wednesday covers senior and secured credit facilities, notes and guarantees, but not yet the leasing agreements for three of its rigs, Seadrill said.

By postponing payments on its bank debt, Seadrill is at risk of cross-defaulting on those leasing deals, the company said.

Among Seadrill's peers, London-based Valaris and Noble Corp filed for Chapter 11 debt restructuring in August, and U.S.-based Diamond Offshore did so in April.

Seadrill, which itself emerged from Chapter 11 bankruptcy court proceedings in 2018, has seen its shares drop more than 98% in the last two years.

A new debt restructuring could again involve a court-supervised process, the company said, while adding that five legal, investment banking and management consulting firms had been appointed as advisors.

(Reporting by Terje Solsvik, editing by Gwladys Fouche)

Categories: Finance Energy Drilling Activity Europe Rigs

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