Valaris, the world’s largest offshore drilling contractor by fleet size, filed for bankruptcy on Wednesday, in a move to restructure its debt load and reduce debt by more than $6.5 billion.
The company has been hit by the combined effects of the global COVID-19 pandemic, a drop in oil prices, and a decline in the demand for its services and falling rig rates.
It said Wednesday it had entered into restructuring agreements with approximately 50% of its noteholders to undergo a financial restructuring that is intended to reduce its debt load substantially, support continued operations during the current lower demand environment and provide a robust financial platform to take advantage of market recovery over the long term.
The agreement implies the full equitization of the company’s pre-petition revolving credit facility and unsecured notes, a fully backstopped rights offering to noteholders for $500 million of new secured notes, the effective cancellation of existing equity interests in the company in exchange for, in certain circumstances, warrants for post-emergence equity and payment of trade claims in full in cash.
It also said it looks forward to working with its other creditors and stakeholders who have not signed the restructuring support agreement ‘to advance the Company’s efforts to restructure its balance sheet.’
As part of the restructuring plan, Valaris voluntarily filed for a Chapter 11 financial restructuring in the United States Bankruptcy Court for the Southern District of Texas.