Business Context and Reporting Period
Seadrill Limited filed this Form 6-K for January 2022. On January 12, 2022, Seadrill New Finance Limited, an issuer within the Seadrill group, announced that the U.S. Bankruptcy Court for the Southern District of Texas confirmed its pre-packaged, “one-day” Chapter 11 restructuring plan.
Seadrill operates an offshore drilling business with a fleet of 37 rigs, including drillships, jack-ups, and semi-submersibles. The restructuring concerns Seadrill New Finance Limited and its subsidiaries, including investments in the Seabras Sapura joint venture and the SeaMex group.
Key Financial and Capital Structure Terms
- Existing holders of the issuer’s 12.0% senior secured notes due 2025 will release existing guarantees, security, and claims against Seadrill and its subsidiaries, subject to stated exclusions.
- Noteholders will receive 65% of the pro forma equity of the restructured issuer. Seadrill Investment Holding Company will retain 35%.
- Noteholders will have rights to appoint four of five directors of the restructured issuer’s group; Seadrill will appoint the remaining director.
- New notes will mature on July 15, 2026 and will bear either 9.0% interest, comprising 3.0% cash interest and 6.0% payment-in-kind interest, or 10.0% payment-in-kind interest. Interest is payable quarterly under the applicable election.
- Redemption pricing is 105% before July 15, 2022, 102% on or after July 15, 2022, and 100% on or after July 15, 2023.
- Noteholders will have first-priority rights to fund additional liquidity needs of the issuer or its affiliates.
- Trade, customer, and other non-funded debt claims are expected to be satisfied in full in the ordinary course of business.
The filing does not provide revenue, profit, cash flow, margin, cash balance, total debt balance, or liquidity amounts for the reporting period.
Material Changes Versus the Prior Comparable Period
- The issuer’s ownership is expected to shift from the wider Seadrill group to the secured noteholders, with the noteholders holding a 65% majority position.
- The issuer and its subsidiaries, including the Seabras Sapura assets and SeaMex group, are expected to be separated from the consolidated Seadrill group.
- The secured notes will be amended and extended from their existing 2025 maturity to July 2026, with revised interest and redemption terms.
- Seadrill will continue providing management services and operational support under management agreements.
Outlook, Risks, Contingencies, and Unusual Items
The issuer expected to emerge from Chapter 11 in the near term. Seadrill stated that confirmation of this plan brought its broader restructuring closer to completion. Seadrill’s separate restructuring plan had been confirmed in October 2021 and was anticipated to become effective in the first quarter of 2022.
The filing states that the issuer’s restructuring was not expected to affect recoveries available to existing shareholders of Seadrill Limited under the Seadrill Limited plan. Consummation of the broader Seadrill plan remained subject to customary terms and conditions, including court approval, although the filing notes that court approval was obtained on October 26, 2021.
Forward-looking statements regarding restructuring, business prospects, market conditions, and future operations are subject to risks and uncertainties. Actual results may differ materially, and the company undertakes no obligation to update these statements.
Important Facts for Investors to Verify
- Effective date and completion of the Seadrill New Finance restructuring and emergence from Chapter 11.
- Final ownership percentages, governance arrangements, and separation of the issuer from the Seadrill group.
- Final principal amount, issuance terms, and interest election for the replacement notes.
- Whether the broader Seadrill Limited restructuring became effective as anticipated in the first quarter of 2022.
- The effect of the restructuring on Seadrill Limited shareholders, creditors, guarantees, and future liquidity.
- Actual financial performance, cash flows, debt balances, and liquidity, which are not provided in this Form 6-K.