In July 2018, Seadrill, one of the world’s largest offshore drilling contractors, emerged from Chapter 11 bankruptcy in the Southern District of Texas.
Kramer Levin, representing the Official Committee of Unsecured Creditors, led efforts that resulted in much higher recoveries for the unsecured creditors than had been originally planned and enabled previously excluded bondholders to participate in the settlement.
At the outset of our representation of the committee — composed of Nordic Trustee AS, Computershare Trust Co., Daewoo Shipbuilding & Marine, Samsung Heavy Industries Co. Ltd., Pentagon Freight Services Inc. and Louisiana Machinery Co. LLC — we conducted an extensive investigation into an insider-friendly deal between the company, its largest shareholder and a minority group of bondholders. Under the original deal, the controlling shareholder (who was also chairman of the board of directors) and other co-investors, including the minority bondholders, would receive significant value in a reorganized company at the expense of general unsecured creditors. The original plan also forced creditors to choose between voting for a plan that released significant claims and provided them with a minimal unfair distribution or voting against it and receiving almost no value.
At the same time that we investigated the pre-bankruptcy transactions and flawed pre-bankruptcy marketing process, we ensured that there was a robust marketing process during the bankruptcy case. We worked closely with another group of bondholders, who had been locked out of the insider-friendly deal prior to the bankruptcy filing, to submit bids for an alternative transaction. The alternative bids highlighted the problematic issues with the original plan and provided leverage for further plan negotiations.
Through the efforts of the committee and this new group of bondholders, all the parties agreed to a global settlement that yielded a 50% larger recovery for general unsecured creditors than had been originally contemplated. Under the revised Chapter 11 plan, unsecured creditors received additional recoveries in the form of cash distributions and increased opportunities to participate in the valuable rights offering (or, alternatively, a cash-out option for those unsecured creditors unable to participate in the rights offering). In addition to the more equitable global settlement, we helped Seadrill restructure its debt from 12 different credit facilities and secure much-needed cash for it to emerge from the restructuring as a healthy company.