George Economou's drilling firm, Ocean Rig, has filed for Chapter 15 bankruptcy in the United States, a form of court protection that will help it to work out claims from stakeholders in multiple countries.
Ocean Rig says that it has already reached a complex restructuring agreement covering about three quarters of the firm's outstanding debt. Its largest creditors will swap $3.7 billion in outstanding principal for new equity, plus $450 million in new secured debt and a cash payment of $288 million. Existing shareholders will be effectively wiped out, “diluted to an insignificant amount of the post-restructuring equity of the company,” and management will receive about 9.5 percent of the newly issued shares.
“Ocean Rig, similar to all rig operators, faces a deep and prolonged industry downturn. Given these conditions, Ocean Rig is taking the appropriate steps to allow us to emerge as a much stronger company that can take advantage of opportunities as they emerge," said Economou, Ocean Rig's CEO and chairman. He emphasized that he remains committed to maintaining Ocean Rig as a going concern; the firm appears well-positioned as a competitor in its restructured form, with an enviable debt-to-equity ratio and a fleet of modern, high-specification drillships.
The firm has been considering a bankruptcy filing since at least August 2016, when it announced that forecasts of continued pain in the offshore sector were prompting it to "assess the viability of [its] capital structure."
Ocean Rig is far from the only offshore drilling company to enter bankruptcy since the downturn began. Singapore-based offshore conglomerate Ezra Holdings filed for Chapter 11 protection on Saturday, and other peers like Paragon Offshore, Hercules Offshore and Vantage Drilling have already filed or warned that they may file in the near future.