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Seadrill lenders send warnings as driller seeks more time to control bankruptcy

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The SEADRILL 3, the first of four oil rigs that Keppel FELS is building for the same customer, is seen in Singapore in this April 21, 2006 file photo. REUTERS/Luis Enrique Ascui/Files

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(Reuters) - Dueling groups of lenders of Seadrill Ltd have warned the offshore drilling contractor that they may cause trouble if they don’t like the direction it takes its bankruptcy, with one group advocating a sale and the other pushing a standalone reorganization.

The two groups filed responses on Friday to Seadrill’s request to extend its exclusive period to file a Chapter 11 plan by four months, which must be approved by Chief U.S. Bankruptcy Judge David Jones in Houston. Seadrill, represented by Kirkland & Ellis, filed its second bankruptcy since 2017 in February with $5.6 billion in secured debt, blaming the sustained downturn in the oil and gas market and the economic impact of the COVID-19 pandemic. At the outset of the case, the company was looking to reorganize rather than sell its assets.

In their response, affiliates of Strategic Value Partners LLC, represented by Quinn Emanuel Urquhart & Sullivan, said they will oppose the exclusivity extension request if Seadrill doesn’t do more to explore sale options. Additionally, the SVP units said, Seadrill is not properly taking into consideration the value of some assets held by bankrupt Seadrill affiliates known as North Atlantic Drilling Ltd (NADL).

“Thus far, the Debtors have flatly refused to undertake even a dual-track process to solicit interest in any alternative plan and a sale of assets, notwithstanding multiple third parties providing unsolicited bids for some and all of the Debtor assets, including assets of the NADL Debtors,” the SVP units said.

The SVP parties are part of a group of Seadrill lenders known as RigCo lenders, which have been urging the company to pursue sale options rather than a standalone reorganization. The larger group of RigCo lenders, which holds $1.3 billion of the company’s debt and is represented by Weil, Gotshal & Manges, has not filed a response to the exclusivity motion.

The other lender group, known as the coordinating committee of secured lenders (CoComm) and represented by White & Case, has supported a pure reorganization of the company that would allow it to emerge from bankruptcy with its existing enterprise intact. The CoComm lenders, which hold $2 billion of the company’s debt, include Citibank Europe Plc and DNB Bank ASA.

Still, the CoComm warned in its response that it has not yet consented to an extension of Seadrill’s use of its lenders’ cash collateral beyond Aug. 31, when the lenders expect a reorganization plan to be approved. The company is asking to extend its exclusivity period to Oct. 8.

Moreover, the CoComm said, it may ask Jones to end Seadrill’s control of the case “if the parties become misaligned or the Debtors deviate from their current path.”

A lawyer for Seadrill, Ross Kwasteniet of Kirkland, did not immediately respond to a request for comment.

A hearing on the exclusivity matter has not yet been scheduled.

Seadrill, a London-based company controlled by Norwegian-born billionaire John Fredriksen, emerged from its prior bankruptcy in 2018 with billions of dollars shed from its debt stack and $1 billion in new investments. The company controls 54 drilling rigs and employs around 3,000 people.

The case is In re Seadrill Ltd, U.S. Bankruptcy Court, Southern District of Texas, No. 21-30427.

For Seadrill: Anup Sathy, Ross Kwasteniet, Brad Weiland, Spencer Winters and Christopher Marcus of Kirkland & Ellis; and Matthew Cavenaugh, Jennifer Wertz, Vienna Anaya and Victoria Argeroplos of Jackson Walker

For the coordinating committee of secured lenders: Scott Greissman, Jason Zakia and Phil Abelson of White & Case; and Jason Brookner of Gray Reed

For SVP and Bybrook: Eric Winston, Benjamin Finestone and Devin van der Hahn of Quinn Emanuel Urquhart & Sullivan

For the RigCo lenders: Alfredo Perez, Matt Barr, Sunny Singh, David Cohen and Paul Genender of Weil, Gotshal & Manges

Read more:

Seadrill lenders agree to extended cash use, for now

Seadrill preps for testy bankruptcy as buyer interest emerges

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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