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Paragon Offshore Chapter 11 Petition, Plan Filed

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According to the U.S. Bankruptcy Court docket, Paragon Offshore and 25 affiliated Debtors filed for Chapter 11 protection in Wilmington, DE and is represented by Mark D. Collins of Richards, Layton & Finger.

Concurrent with its Chapter 11 petition, the Company also filed a Joint Plan of Reorganization and related Disclosure Statement. The Disclosure Statement asserts, “The Restructuring will leave the Debtors’ business intact under Paragon Parent and substantially de-lever it, providing for the reduction of $1.1 billion of the Debtors’ existing debt and $60 million of the Debtors’ annual cash interest expense upon the completion of the Restructuring. This deleveraging will enhance the Debtors’ long-term growth prospects and competitive position and allow the Debtors to emerge from their chapter 11 cases…as reorganized entities better positioned to withstand a depressed market for offshore contract drilling.”

The Company also announced that it has entered into a plan support agreement (PSA) with an ad hoc committee representing approximately 77% in the aggregate of holders of Paragon Offshore’s 6 3/4% Senior Unsecured Notes maturing July 2022 and 7 1/4% Senior Unsecured Notes maturing August 2024 to support a balance sheet restructuring. Furthermore, a group comprising approximately 89% of the amounts outstanding under Paragon Offshore’s senior secured revolving credit agreement has also signed the PSA. Under the terms of the PSA, , holders of $457 million of the Company’s 6 3/4% Senior Unsecured Notes maturing July 2022 and holders of $527 million of its 7 1/4% Senior Unsecured Notes maturing August 2024 will collectively receive $345 million of cash. Bondholders will also be entitled to receive additional cash payments if Paragon’s consolidated EBITDA meets certain targets in 2016 and 2017. If consolidated EBITDA equals or exceeds $209 million in 2016, the Bondholders will receive a cash payment of $20 million at the end of 2016.

For 2017, if consolidated EBITDA equals or exceeds $248 million but is less than $276 million, the Bondholders will receive a cash payment at the end of 2017 of $15 million; however, if EBITDA equals or exceeds $276 million, the bondholders will receive a cash payment at the end of 2017 of $30 million. Paragon Offshore will also issue equity to bondholders such that bondholders will own 35% of the Company’s common equity upon the consummation of the restructuring. Existing shareholders will retain ownership of 65% of the common equity. The bondholder group will be entitled to appoint one additional member to the board of directors following the financial restructuring.

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