Seadrill Buys Time with New Forbearance Agreement with Most Creditors
Troubled rig operator Seadrill Limited announces that that has bought itself more time to continue to negotiate on its reorganization plan. The company, which operates drilling rigs for the petroleum industry, reported that it has entered into a new forbearance agreement with certain creditors pledging not to take action during January.
Seeking to stabilize its declining financial strengths, Seadrill entered into its first forbearance agreement with creditors in September. That agreement ended in the beginning of November but the company was able to reach a second agreement later in the month. That agreement expired in mid-December leaving the company exposed to potential actions by its creditors and lease holders.
Under the new agreement, those creditors will not take action in the event that the company defaults on senior secured credit facility agreements. The new agreement cover possible defaults through January 29, 2021.
Seadrill, however, cautioned that forbearance agreements had not been reached on three remaining senior secured credit agreements, including its New Secured Notes, leasing arrangements for the West Hercules, West Linus and West Taurus and a bilateral guarantee facility with Danske Bank. A non-payment of interest or other amounts due under those agreements could result in the creditors having the right to accelerate or otherwise enforce their rights under the terms of those agreements.
The company said these latest agreements were designed to provide more time to finalize negotiations on the terms of a comprehensive restructuring of its balance sheet. Seadrill said that its management continues to evaluate capital structure proposals from its financial stakeholders, but it did not rule out the use of a court-supervised process.
In December, Seadrill Partners, a separate limited liability company formed by Seadrill Limited to own, operate and acquire offshore drilling rigs, announced that its operating subsidiaries had sought voluntary bankruptcy in the U.S. courts.
Seadrill has struggled to recuperate from the long-term decline in the oil markets. Billionaire shipowner John Fredriksen, who was Seadrill's founder and controlling shareholder, played a key role in shepherding Seadrill through a giant restructuring agreement with its bankers after the 2014 oil market collapse, but the company remained heavily indebted, even before the recent coronavirus-related downturn.
In June 2020, Seadrill was delisted from the New York Stock Exchange because its stock price was too low to meet the Big Board’s requirements. The company also issued a “going concern” warning citing market conditions and its need to restructure its debt.