Seadrill Limited — Form 6-K Summary
Business context and reporting period
Seadrill Limited, an offshore drilling contractor, filed this Form 6-K for September 2020. The filing, dated September 16, 2020, reports developments concerning the company’s debt obligations and proposed balance-sheet restructuring.
Financial position and liquidity
- Seadrill entered into forbearance agreements with certain creditors covering senior secured credit facilities, senior secured notes, and a guarantee facility agreement.
- Consenting creditors agreed not to exercise voting rights or take specified actions relating to certain defaults arising from September 2020 interest payments, through the earlier of September 29, 2020, or termination of the forbearance agreements.
- The filing provides no clear figures for revenue, profit, cash flow, margins, cash balances, debt balances, or liquidity.
Material changes and restructuring
- The company and its stakeholders are using the forbearance period to negotiate the key terms of a comprehensive balance-sheet restructuring.
- No restructuring agreement had been reached as of the filing date.
- Seadrill stated that potential solutions were expected to involve significant equitization of debt and were likely to result in minimal or no recovery for current shareholders.
- Forbearance had not been agreed for termination events under leasing agreements for the West Hercules, West Linus, and West Taurus. A nonpayment under the covered agreements could therefore trigger cross-default enforcement under those leases.
Outlook, risks, and unusual items
- The restructuring could involve a court-supervised process.
- Failure to obtain additional forbearance, reach a restructuring agreement, or make required interest payments could lead to defaults, cross-defaults, creditor enforcement, and further financial distress.
- Seadrill engaged Kirkland & Ellis LLP, Houlihan Lokey, Alvarez & Marsal, Slaughter and May, and Advokatfirmaet Thommessen AS as legal, financial, restructuring, corporate, and Norwegian counsel advisers.
- Management’s forward-looking statements are subject to substantial risks and uncertainties, and the company undertook no obligation to update them.
Key facts investors should verify
- Whether the forbearance agreements were extended, terminated, or replaced after September 29, 2020.
- Whether lenders or lessors enforced defaults or cross-defaults involving the West Hercules, West Linus, or West Taurus.
- The final restructuring terms, including the extent of debt equitization and treatment of existing shareholders.
- Whether a court-supervised insolvency or restructuring process was commenced.
- The company’s current cash position, debt maturities, interest-payment status, and operating liquidity, none of which are quantified in this filing.