COURT: Ocean Rig schemes win Chapter 15 recognition in uncontested hearing after Highland gives up fight

20 September 2017

Ocean Rig has been cleared to complete its restructuring, after US Bankruptcy Judge Martin Glenn said this morning that he would sign an order recognizing a Cayman court’s approval of the offshore drilling services company’s schemes of arrangement. Highland Capital Management, the sole creditor to challenge the schemes, did not raise any objections at today’s hearing.


Highland holds USD 74m in Ocean Rig UDW unsecured notes due 2019. The fund challenged the schemes in the Cayman Islands and previously said it would challenge Chapter 15 recognition if it lost there, but did not do so today. It did, however, file a lawsuit against two Ocean Rig subsidiaries and executives in the High Court of the Republic of the Marshall Islands on 31 August, but the lawsuit does not affect the restructuring, Ocean Rig lawyers say. 



Today’s order will allow Ocean Rig to complete its restructuring ahead of a 25 September deadline set by Nasdaq. The company announced yesterday a 1-for-9,200 reverse stock split of its common shares, which will take effect at 5pm ET on 21 September. New common stock will begin trading on a split-adjusted basis on 22 September under the existing trading symbol, “ORIG.” 



The offshore drilling company shifted its center of main interest (COMI) to the Cayman Islands last year in order to undertake its restructuring. The company, which owns 11 drillships and two semi-submersible rigs, filed its winding up petitions in the Cayman Islands on 24 March, with Simon Appell of AlixPartners and Eleanor Fisher of Kalo Advisors named joint provisional liquidators (JPL). The JPLs undertook a “light touch” restructuring, using four separate but interdependent Cayman schemes of arrangement for Ocean Rig UDW and its subsidiaries – Drill Rigs Holdings Inc (DRH)Drillships Financing Holding Inc (DFH) and Drillships Ocean Ventures Inc (DOV). Together, the plans swapped USD 3.7bn in debt with new equity, USD 288m in cash and USD 450m in new secured debt.



With no objections, the hearing today was brief. Ocean Rig counsel Evan Hollander, of Orrick, said the schemes would ultimately expunge more than USD 1.1bn in debt from the company’s balance sheet, following a total of six days of hearings before Justice Raj Parker, in the Grant Court of the Cayman Islands – three days for the convening hearing in July, and three for the scheme sanction hearing, earlier this month.  Justice Parker signed his order approving the schemes last week.



Despite the lack of objections at today’s hearing, Judge Glenn made clear that the restructuring under the schemes would likely have been approved in the US under a Chapter 11 as well.



“In my view, it certainly appears to me that on its face I don’t think there’s a convincing argument to be made that the distributions to Highland somehow are substantially different than they would be in a Chapter 11 case here,” he said.



 



“The court has read carefully, multiple times, Justice Parker’s judgment providing a very careful, thoughtful, reasoned decision in support of his entry of the order sanctioning the schemes of each of the foreign debtors,” Glenn noted. “In Justice Parker’s opinion, he carefully reviews and overrules the objection by Highland Capital, which was the only objector during the sanction hearing earlier this month in the Caymans.”



Judge Glenn said that he does not intend to write an opinion addressing the issues in the case.



Highland did not respond to a request for comment.



CLICK HERE to view the Cayman judgment sanctioning the schemes. 
CLICK HERE to view Debtwire’s Ocean Rig Case Profile. 
CLICK HERE to view all Ocean Rig UDW Chapter 15 filings on Debtwire Dockets.



by John Bringardner