Valaris gets court approval for Chapter 11 plan, delays drillship deliveries

Offshore drilling contractor Valaris has obtained court approval for its Chapter 11 plan of reorganization and agreed with a South Korean shipyard to delay the delivery of two drillships.

To remind, Valaris filed for bankruptcy protection in an attempt to restructure its debt back in August 2020.

In late September 2020, the rig owner executed a new term loan credit agreement, gaining access to additional liquidity as it is working through its Chapter 11 bankruptcy process.

In February 2021, Valaris reached an agreement with lenders related to its restructuring support agreement and backstop commitment agreement, bringing the company one step closer to emerging from the Chapter 11 process.

In an update on Wednesday, Valaris said it had received approval from the United States Bankruptcy Court for the Southern District of Texas of its prearranged plan of reorganization.

In addition to Bankruptcy Court confirmation, the plan received support from approximately 80 per cent of the company’s unsecured notes and bank lenders representing 100 per cent of the company’s credit facility claims.

In addition, approximately 81 per cent of the company’s voting shareholders voted to accept the plan.

“I am pleased that we have received strong support for the Company’s amended plan. This is an important milestone, as it clears the path for Valaris to emerge from chapter 11 early in the second quarter. The overwhelming support from our noteholders and bank lenders shows their confidence in our go-forward strategy and strength as a company”, said Tom Burke, President and Chief Executive Officer of Valaris.

“This achievement would not have been possible without the continued dedication and loyalty from our employees, customers, vendors and other partners. We look forward to emerging swiftly with our strengthened capital structure which, combined with our high-quality rig fleet and personnel, positions the company well in a still challenging offshore drilling market”.

Upon emergence and implementation of the plan, the company will eliminate $7.1 billion of existing debt.

Valaris will receive a $520 million capital injection through the issuance of a $550 million secured note maturing in 2028.

The note includes the option of an 8.25 per cent cash coupon, 10.25 per cent half cash, half paid-in-kind coupon or 12 per cent paid-in-kind coupon, all at the company’s election.

Valaris delaying drillship deliveries

Valaris has also reached an agreement with Daewoo Shipbuilding & Marine Engineering to amend its two newbuild drillship contracts.

Under the amendmnet, it was agreed to extend each delivery date to 31 December 2023, while giving the company the option to take delivery early or terminate the contracts on a non-recourse basis.

According to the rig owner’s latest fleet status report, the previous scheduled delivery date for VALARIS DS-13 was 3Q 2021 and for VALARIS DS-14 the delivery date was set for 2Q 2022.

Final payments for the VALARIS DS-13 and VALARIS DS-14 are estimated to be approximately $119 million and $218 million, respectively.

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