Offshore drilling contractor Diamond Offshore has entered into a restructuring agreement to deleverage its balance sheet and is now seeking to emerge from Chapter 11 bankruptcy.
Diamond said on Monday it had entered into a plan support agreement with holders of over 70 per cent of each of its senior unsecured notes and revolving credit facility loans regarding a financial restructuring transaction that will significantly deleverage the company’s balance sheet.
As previously reported, Diamond and certain of its subsidiaries in late April 2020 filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court.
The plan support agreement outlines a comprehensive plan for deleveraging the company’s balance sheet through the equitization of its senior unsecured notes, resulting in a reduction of over $2.1 billion of funded indebtedness.
In addition, certain holders of senior unsecured notes have agreed to invest up to $110 million of new capital in the form of first-lien, last out exit notes, while certain holders of revolving credit facility loans have agreed to provide exit financing facilities in the form of a $300 million to $400 million first-lien, first-out revolving credit facility and a $100 million to $200 million first-lien, last-out term loan facility.
Proceeds of the new exit financing facilities will fund plan distributions and provide sufficient liquidity for Diamond to operate successfully post-emergence.
To that end, the company is seeking to emerge from the Chapter 11 Cases as quickly as the Court’s schedule and the requisite notice periods will permit.
According to Diamond, the agreed plan was developed over the course of several months of detailed discussions with the company’s key stakeholders.
The plan is designed to ensure that Diamond can continue to operate its fleet of offshore drilling rigs in a safe, reliable, and efficient manner in what continues to be a challenging market. After the restructuring, Diamond will have a strong cash position with sufficient liquidity to benefit from an eventual market recovery.
Marc Edwards, Chairman, President and Chief Executive Officer, said: “The comprehensive plan support agreement we signed today raises new capital and is overwhelmingly supported by our banks and our bondholders.
“We look forward to emerging with a stronger balance sheet, significantly less debt, and increased financial flexibility”.