SEADRILL'S BANKRUPTCY

FT - Seadrill, one of the world’s largest offshore drilling companies, filed for bankruptcy after it secured agreement from nearly all of its banks to support a plan to inject $1bn in new capital and all but wipe out existing shareholders.

The company, controlled by billionaire ship owner John Fredriksen, has been struggling ever since the 2014 crash in oil prices and has been working with its creditors for 18 months in search of a deal to restructure almost $10bn in debt.

The proposal would see $5.7bn of bank debt extended by about five years with no amortisation payments due until 2020. Holders of $2.3bn in bonds would be offered about 15 per cent of equity in the newly restructured company. Existing shareholders would receive just 2 per cent.

The plan has the support of 97 per cent of Seadrill's senior lenders, 40 per cent of its bondholders and a group of investors led by Mr Fredriksen. The fresh capital will consist of $200m in equity and $860m in secured notes.

Anton Dibowitz, chief executive, said of the backing for the proposal: "This is a testament to our position in the sector, having a large, modern fleet, a top-quality customer base and a proven operating record. With our improved capital structure, we will be in a strong position to capitalise when the market recovers."

Seadrill became the crown jewel in Mr Fredriksen's business empire but its shares have lost 99 per cent of their value since 2014. The world's most influential shipowner described attempts to restructure the debt as the most complicated transaction of his career earlier this year.

Seadrill's bankruptcy is only the latest sign of upheaval in the offshore drilling market. Hercules and Paragon have both filed for bankruptcy while there are signs of consolidation among the remaining operators. Transocean is paying $1.1bn for Norway's Songa Offshore while US rival Ensco is buying Atwood Oceanics. Maersk Drilling, the offshore rig unit of the Danish conglomerate, will either be sold or spun off in the next year.

Seadrill acted now because it has a bond worth $895m coming due on Friday. It filed for Chapter 11 protection in the Southern District of Texas late on Tuesday. It applied for so-called first day motions, which allow it to continue day-to-day operations as normal, and said it had about $1bn in cash. 

Seadrill has 32 operating rigs but 20 more that are currently idle. It is in talks with several rig builders, including Samsung Heavy Industries, about delaying delivery of two new rigs after reaching a similar deal with Cosco over one vessel.

Kirkland & Ellis is acting as legal counsel, Houlihan Lokey as financial adviser and Alvarez & Marsal as restructuring adviser.

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