Seadrill's Asian Subsidiaries File for Bankruptcy Reorganization
Seadrill, which had once been a leading operator of offshore rigs, became the latest company in the industry to seek bankruptcy protection. Founded by John Fredriksen, the company once had the highest stock market valuation in the industry, but like most companies in the sector had been struggling with the prolonged downturn in the market after the collapse of the price of oil.
As part of the ongoing reorganization of the company, Seadrill announced that it had filed Chapter 11 bankruptcy cases for five of its Asian operating in the Southern District of Texas court on February 7.
“The Chapter 11 cases were filed as a protective measure to support Seadrill’s broader comprehensive financial restructuring and will in no way affect the safe and efficient operation of the AOD offshore drilling units,” they wrote in the announcement of the filings. “The company will request authority to pay its key trade creditors and employee wages and benefits without change or interruption and expects it will pay all suppliers and vendors in full under normal terms for goods and services provided during the Chapter 11 cases.”
Seadrill had been seeking agreements with its creditors for a restructuring plan for its debt. The company previously emerged from bankruptcy in July 2018, but continued to carry nearly $6 billion in debt. They had struggled to manage when the expected rebound the price of oil failed to materialize. The company had been delisted from the New York Stock Exchange and in June 2020 issued a “going concern” warning citing market conditions and its need to restructure its debt.
Seadrill had entered into a series of forbearance agreements with its creditors starting in September 2020 as it continued to negotiate the restructuring. Seadrill had frequently cautioned that the restructuring may involve the use of a court-supervised process.
The latest forbearance agreement was announced on February 3, but at the time the company said it had entered into an agreement with certain creditors in respect of nine out of the group's twelve senior secured credit facility agreements. That agreement, which was scheduled to last only until February 15, did not include three remaining senior secured credit agreements, the company's New Secured Notes, leasing arrangements for the West Hercules, West Linus, and West Taurus, and a bilateral guarantee facility with Danske Bank. The bankruptcy filings terminated the forbearance agreements.
Seadrill Partners, a separate limited liability company formed by Seadrill Limited to own, operate, and acquire offshore drilling rigs, announced in December 2020 that its operating subsidiaries had sought voluntary bankruptcy protection in the U.S. courts.