Ocean Rig UDW Files for U.S. Bankruptcy Protection -- Update
28 Março 2017 - 03:05PM
Dow Jones News
By Patrick Fitzgerald
Offshore drilling contractor Ocean Rig UDW Inc. filed for
bankruptcy protection in the U.S. to block distressed debt
investors from interfering with a debt restructuring that will
slash $3.7 billion in debt from its books.
The Cayman Islands holding company filed Monday night for
protection under chapter 15, the section of the U.S. code dealing
with cross-border insolvencies. Ocean Rig is one of a number of
offshore rig owners and operators brought down by the prolonged
slump oil and gas prices.
In a filing Monday filing with the U.S. Bankruptcy Court in New
York, Antonios Kandylidis, Ocean Rig UDW's president, said the U.S.
filing was necessary to protect the company from "vulture
investors" who bought up the company's debt last year on the cheap,
hoping to take advantage of the steep decline in oil prices.
"These were bad bets," said Mr. Kandylidis, alluding to the
traders' wager that Ocean Rig would pay off its bonds at maturity.
Instead, facing an April 3 interest payment of $14.9 million, Ocean
Rig filed for bankruptcy to pursue its debt-for-equity swap with
lenders.
Judge Martin Glenn of the U.S. Bankruptcy Court in New York
Monday granted Ocean Rig a temporary restraining order to block
creditors from interfering with its debt restructuring.
Under the company's proposed restructuring plan, Ocean Rig
lenders and investors will swap $3.7 billion in debt for the new
equity in the reorganized company plus $288 million in cash and new
secured debt of $450 million. Lenders, owed $3.1 billion, would
divvy up 76.2% of the equity in the new company.
Funds owed $131 million in senior unsecured bonds would get
20.9% of the equity in the new company, and the senior secured
bondholders -- those distressed debt funds referred to by Mr.
Kandylidis as "vulture investors" -- would get 2.9%.
Senior secured bonds issued by Ocean Rig subsidiary Drill Rig
Holding are due to mature in October. The bonds have recently
traded at 34 cents on the dollar, according to FactSet. The
outstanding senior unsecured debt matures in 2019. Those notes
recently traded at 32 cents on the dollar, according to
FactSet.
Ocean Rig Chairman George Economou, the Greek shipping magnate
who also heads dry-bulk carrier DryShips Inc., said the company
"faces a deep and prolonged industry downturn."
With crude prices hovering around $50 a barrel, oil companies
have cut expenditures on drilling and this, coupled with a glut of
rigs, has put rig owners under severe pressure.
Of the company's 11 ultra-deepwater drilling rigs, six have been
decommissioned and are in storage. Of the five in operation, only
one is under contract past next year, Mr. Kandylidis said.
Ocean Rig's largest individual shareholder is James Dondero,
co-founder of the $15 billion hedge fund Highland Capital
Management. Highland is also Ocean Rig's largest senior unsecured
bondholder and one of the company's lenders.
The distressed debt funds and Highland "are positioning
themselves to stymie [Ocean Rig's] reorganization efforts in order
to extract value to which they are not entitled to under any
reasonable restructuring scenario," Mr. Kandylidis.
Highland, earlier this month, revealed it had discussions with
Messrs. Economou and Kandylidis about an Ocean Rig debt
restructuring but talks were called off before any deal could be
reached.
A Highland spokeswoman declined to comment on the Ocean Rig
bankruptcy.
AlixPartners' Eleanor Fisher and Simon Appell have been
appointed Ocean Rig UDW's Cayman liquidators. Evan Hollander of
Orrick, Herrington & Sutcliffe is handling the U.S. bankruptcy
case. The case number is 17-10736.
Ocean Rig is scheduled to make its debut in New York bankruptcy
court on Monday.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
March 28, 2017 13:50 ET (17:50 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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