Paragon Offshore and its lenders have entered into an agreement to revise the company's restructuring plan in hopes to emerge from its bankruptcy process later this year in October.
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The Paragon MSS1. Image from Semco Maritime. |
“During the course of the confirmation hearing for our initial restructuring plan, certain feasibility-related issues arose and the court expressed certain concerns,” Randall D. Stilley, Paragon president and CEO said. “To address those concerns, the company prepared a downside sensitivity case to the projections and then, through discussions with the bondholders and revolver lenders, we developed the revised plan that allows us to retain more cash in the near term while improving our longer-term potential.”
Under Paragon’s revised plan, the revolving credit agreement will still be modified to include a US$165 million cash pay down with the balance of approximately $631 million.
However, the minimum liquidity covenant will be reduced from $110 million to $103. In addition, shareholders will collectively receive $285 million of cash, or $60 million less than in the original plan, eliminating the contingency payment provisions for 2016 and 2017. In exchange, Paragon will issue a $60 million note due 2021 to shareholders.
“We believe the changes we have made in the revised plan increase the likelihood that our restructuring plan will be confirmed, which will allow us to quickly complete the restructuring process as a company well-positioned to create long-term shareholder value,” Stilley said.
Also under the revised plan, the agreement between Paragon and Noble Corp. will remain in place, but with certain modifications. Noble has agreed that in lieu of cash, Paragon may pay to Noble any taxes owed under the deal relating to Mexican taxes up to a maximum value of $5 million, potentially enabling the company to preserve additional cash during the course of the downturn.
Paragon announced its plans to file for bankruptcy in February, anticipating to eliminate $1.1 billion of debt, and reduce annual cash interest payments by nearly $60 million.
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