SDRL Seadrill Limited

By Peg Brickley 

Seadrill Ltd., the offshore energy company run by Norwegian billionaire John Fredriksen, quelled opposition to its bankruptcy exit plan by making room for more creditors to invest in getting the company back on its feet.

Weeks of talks headed off a threatened open-court battle over Seadrill's attempt to reshuffle its debts and bring in new money. An April 17 court hearing has been set for a chapter 11 plan confirmation hearing, where a bankruptcy judge in Houston will be asked to authorize Seadrill to raise new money and refashion its $8 billion load of debt. On Monday, Judge David R. Jones granted Seadrill permission to start the process of polling creditors on a chapter 11 restructuring plan designed to get the company in financial shape to compete for business in the rocky energy market.

With its profits hurt by a slump in drilling activity, Seadrill filed for chapter 11 bankruptcy protection last year, having reached a deal that would allow Mr. Fredriksen, private-equity firm Centerbridge Partners and a handful of investment firms to raise more than $1 billion to bail the company out of trouble.

Creditors left on the sidelines, including Barclays Capital and a cadre of unsecured bondholders, protested, complaining that Centerbridge and Mr. Fredriksen had unfairly put together a sweetheart deal for themselves and a few supporters.

The official committee representing all unsecured creditors agreed, and started getting ready to sue.

On Monday, Seadrill unveiled settlements that will stop the legal threats and bring support for the chapter 11 turnaround plan to at least 70% of unsecured bondholders, up from the 40% level of support the original plan enjoyed.

Barclays and the unsecured bondholder groups are dropping threats to put together rival restructuring deals, after being invited into the investment opportunity on favorable terms. The official committee of unsecured creditors is now urging a "yes" vote on the revised plan because of the improved treatment, according to new chapter 11 plan papers filed Monday in the U.S. Bankruptcy Court in Houston.

Thomas Moers Mayer, lawyer for the committee, said Monday that Seadrill's banks agreed to stretch out the maturity on their loans, as long as the company raised at least $1 billion in fresh cash to shore up its finances to weather tough industry conditions. The question for Seadrill was "who got the opportunity" to participate in the bailout, Mr. Mayer said. Under pressure from Barclays and the bondholder group, Seadrill made room in the deal for more participants in the investment, and found some cash for junior creditors that aren't positioned to make the investment.

Seadrill estimates general unsecured creditors are being offered debt investment rights worth at least $239 million, as well as equity rights worth at least $136 million, in the revised plan, court papers say. As a result, some unsecured creditors could recover as much as 47% of what they are owed, a 15-point improvement from the original plan, court papers say.

The company also made peace with Samsung Heavy Industries Co. Ltd. and Daewoo Shipbuilding & Marine Engineering Co. The shipyard operators together accounted for about $1 billion in potential claims against Seadrill.

When it filed for bankruptcy, Seadrill had signed contracts for the construction of new drillships, deals that could have erupted into litigation. Instead, Daewoo, Samsung and Seadrill agreed to push the contracts aside for now, and allow the new rigs to be marketed for sale.

Some things didn't change in the revised turnaround plan. As in the original plan, top-ranking banks will stretch out the maturity on their loans, giving Seadrill a longer period of time to recover from the energy-market turmoil. Seadrill shareholders that fought a losing battle for better treatment will get a 2% stake in the reorganized company, less than half of what Mr. Fredriksen's investment company, Hemen Holding, will collect as a "fee" for going along with the restructuring.

Mr. Fredriksen, who had negotiated an immunity deal that shielded him from lawsuits over his handling of the company's affairs as part of the original turnaround strategy, will continue to be protected from litigation under the revised plan.

Not long before before Seadrill's September bankruptcy filing, Seadrill paid a Cyprus affiliate controlled by Mr. Fredriksen about $21 million. Additionally, the company paid about $23 million in salaries and bonuses to high-ranking company leaders whom, in a break from bankruptcy practices in the U.S., it is refusing to name, according to court papers. Seadrill is resisting pressure from U.S. bankruptcy watchdogs to disclose the details of payments to insiders.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

February 26, 2018 18:24 ET (23:24 GMT)

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