Cortland Capital Market Services filed with the U.S. Bankruptcy court an objection to Paragon Offshore’s Second Amended Joint Chapter 11 Plan.
The objection asserts, “The Third POR is no ‘fresh start.’ Under the Third POR, the Debtors will emerge from Chapter 11 grossly insolvent, highly overleveraged and with no reasonable prospect of refinancing their debts, including the Secured Term Loan, at maturity. The Debtors’ woeful financial condition will be transparent to the Debtors’ customers in the offshore oil rig market – a market that is widely expected to be ‘lower for longer.'”
The objection continues, “Accordingly, the Debtors simply will be unable to achieve the Third Business Plan, which they coyly describe as a ‘downside sensitivity’ scenario in an effort to entice the Court into believing that the Third Business Plan is achievable (when it plainly is not). If the Third POR were consummated, the Debtors would emerge from Chapter 11 grossly insolvent. They would be saddled with approximately $1.43 billion in debt even though their enterprise value (i.e., value of their assets as a going concern) would be substantially less than $1 billion. Thus, the Debtors’ capital structure at emergence simply cannot support their overwhelming debt burden. Because the Debtors would emerge from Chapter 11 in a grossly insolvent financial state, the Third POR is not feasible and not confirmable as a matter of law. The Debtors’ upside-down capital structure at emergence would severely impede their ability to obtain rig contracts in any market.”
Cortland Capital Market Services further argues, “Consequently, the Third POR would eventually be followed by liquidation or the need for further reorganization.” Cortland Capital Market Services also filed a separate motion for authority to file an un-redacted version of this objection under seal.
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