Diamond Offshore Latest in Industry to Complete Restructuring Plan
Diamond Offshore Drilling, has become yet the latest rig operator for the energy industry to announce a comprehensive restructuring package for its troubled operations. After years of decline due to the drop in oil price and companies reducing their exploration efforts, many in the industry sought debt relief or filed for reorganizational bankruptcy.
Diamond and certain of its subsidiaries filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code in April 2020. At the time, the company said it had sufficient short-term capital to continue its operations, which include 15 offshore drilling rigs, while the company and its advisors pursued negotiations with its key stakeholders regarding a comprehensive restructuring plan to address the capital structure.
The company announced that it has entered into a plan support agreement with holders of over 70 percent of its senior unsecured notes and revolving credit facility loans. The financial restructuring transaction will significantly deleverage the company's balance sheet clearing the way for Diamond to emerge from bankruptcy protection.
The plan was developed through discussions with the company's key stakeholders, and is designed to ensure that Diamond can continue to operate its fleet, consisting of 11 semisubmersibles and four dynamically positioned drillships, in what the company continues to describe as a “challenged market.”
"The comprehensive plan support agreement we signed today raises new capital and is overwhelmingly supported by our banks and our bondholders,” said Marc Edwards, Chairman, President and Chief Executive Officer. “We look forward to emerging with a stronger balance sheet, significantly less debt, and increased financial flexibility. With our improved capital structure, we will be in a strong position to capitalize on market opportunities as they emerge."
After the restructuring, Diamond will have a strong cash position with sufficient liquidity. The plan includes a reduction of $2.1 billion in debt by converting the senior unsecured notes to equity in the company. Some of the bondholders will invest up to $110 million of new capital in new notes while holders of revolving credit facility loans will provide new financing facilities of between $400 and $600 million.