Seadrill Limited Form 6-K Summary
Business context and reporting period
Seadrill Limited, a Bermuda-based offshore drilling contractor, filed this Form 6-K for November 2020. The filing, dated November 20, 2020, announces creditor forbearance agreements and ongoing negotiations to restructure the company’s balance sheet.
Financial position and liquidity
The filing does not provide revenue, profit, cash flow, margin, debt-balance, or liquidity figures. It states that the group had not made certain interest and charter-hire payments under senior secured credit agreements and leasing arrangements.
The affected leasing arrangements include those for the West Hercules, West Linus, and West Taurus. These missed payments could give rise to events of default under the relevant agreements.
Material changes and creditor actions
- Seadrill entered into forbearance agreements with certain creditors under its senior secured credit facilities and specified leasing agreements.
- Consenting creditors agreed not to exercise voting rights or take certain enforcement actions relating to specified events of default.
- The forbearance period runs until the earlier of December 14, 2020, or termination of the agreements.
- No forbearance had been agreed for termination events under the company’s New Secured Notes or its bilateral guarantee facility with Danske Bank.
- Absent additional forbearance, non-payment under the covered agreements could trigger cross-default enforcement under the New Secured Notes and/or the Danske Bank facility.
Restructuring outlook, risks, and unusual items
The forbearance is intended to provide additional time for Seadrill and its stakeholders to negotiate the principal terms of a comprehensive balance-sheet restructuring. A court-supervised process may be used.
Management stated that no restructuring agreement had been reached as of the filing date. Potential solutions were expected to involve significant equitization of debt and were likely to result in minimal or no recovery for current shareholders.
Key risks include continued payment defaults, termination or expiration of forbearance arrangements, cross-defaults, enforcement by creditors, and a potential court-supervised restructuring. The filing also cautions that forward-looking statements involve substantial risks and uncertainties.
Important facts for investors to verify
- Whether Seadrill obtained forbearance for the New Secured Notes and the Danske Bank bilateral guarantee facility.
- Whether additional payment defaults or cross-defaults occurred before December 14, 2020.
- Whether the forbearance agreements were extended, terminated, or replaced by a restructuring agreement.
- The terms and extent of any proposed debt equitization and its impact on existing shareholders.
- Whether a court-supervised restructuring or other insolvency-related process was commenced.