Rig Operator Diamond Offshore Files for Bankruptcy
On Monday, offshore drillrig operator Diamond Offshore filed for Chapter 11 bankruptcy protection in a federal court in Texas, without reaching prior agreement with its creditors. Its operations are expected to continue uninterrupted, but the filing has implications for its bondholders and shareholders. Diamond's stock price fell by about 60 percent Monday morning before trading was halted.
"Diamond remains focused on maintaining its high standards as it relates to safety and operational excellence during the [bankruptcy] process. Our clients and vendors should expect business as usual across our organization as our world class team will stay steadfast on our collective goal of providing superior operations that clients have come to expect from Diamond Offshore," said president and CEO Marc Edwards.
Diamond says that it is now in negotiations with creditors and stakeholders for a debt restructuring plan, and that it has "sufficient capital to fund its global operations in the ordinary course and to make continued investments in safety and reliability during the reorganization proceedings."
Two weeks ago, Diamond signaled that it would not be making a scheduled interest payment and said that it had retained restructuring advisors. Many Chapter 11 bankruptcies proceed after the company reaches an agreement with its creditors - a "prepackaged bankruptcy" - but Diamond moved more quickly. In a court filing, Diamond's many subsidiary companies said that they filed in order to "preserve their valuable contract backlog, and preserve their approximately $434.9 million in unrestricted cash on hand while avoiding annual interest expense of approximately $140.1 million . . . and to stabilize operations while proactively restructuring their balance sheet."
Analysts expect that Diamond's shareholders will likely lose their stake in the bankruptcy process and that creditors will ultimately take possession of the company. Diamond itself forecast that its stockholders "could experience a significant or complete loss on their investment, depending on the outcome" of the proceedings.