Seadrill Limited splinter group brings FA on board; gears up for alternative financing deal

20 September 2017

Seadrill Limited’s splinter group of unsecured holders has hired Rothschild & Co as financial advisor, said two sources familiar with the matter. The mandate complements the hiring of legal counsel Stroock this week to lead a legal battle against the RSA, which bars certain unsecured creditors from participating in a new money investment.

 

The splinter group holds more than 27% of the unsecured notes and aims to grow its position to one-third of the bonds. The group is also working on an alternative financing that would provide a cheaper option to all bondholders, said one of the sources familiar.

 

Seadrill’s RSA includes a “go-shop” marketing period in which the debtors may sign onto a better proposal and a fiduciary out that would allow the debtors to back out of the current deal with Hemen, Centerbridge and a group of syndicate holders, without incurring a breakup fee. Among the members of the splinter group are BFAM Partners, and Nine Masts Capital.

 

Seadrill, a London-based company with US headquarters in Houston, filed for bankruptcy on 12 September with a restructuring support agreement that contemplates a USD 1.06bn capital contribution from an investment group (Hemen Holding) led by billionaire CEO John Fredriksen, and Centerbridge Credit Partners. The over USD 1bn commitment is backed not only by Hemen and Centerbridge but also a syndicate of additional investors who hold roughly 30% of the company’s USD 2.3bn in unsecured bonds. The syndicate of investors, together with Hemen and Centerbridge, hold roughly 40% of the unsecured bonds, according to the RSA.

 

 

The proposed plan would extend the maturity of the company’s debt by about five years, implement covenant relief and eliminate near-term amortization obligations. Seadrill would equitize USD 2.3bn in unsecured bond obligations, issue USD 860m in new secured notes, and receive a USD 200m direct equity investment. The RSA is backed by a majority of holders of the company’s USD 5.7bn bank debt.

 

Unsecured holders at Seadrill Limited, NADL, and Sevan will receive their pro rata share of 15% of the reorganized equity, plus their pro rata share of subscription rights to participate in up to USD 85m of the new secured notes and USD 25m of the equity investment.

 

Rothschild declined to comment.