DALLAS, TX – Valaris Plc today became the latest casualty of the global plunge in oil prices after filing for bankruptcy Wednesday as the world’s largest offshore rig owner by fleet size looks to restructure an approximately $7 billion debt load.
The Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas comes shortly after the company announced that it may be forced to seek creditor protection after skipping several bond payments.
In a statement Wednesday, Valaris Plc announced that after making a binding Restructuring Support Agreement and Backstop Commitment Agreement with approximately half of its noteholders the company received approximately $500 million in debtor-in-possession financing.
The company recently listed several assets totaling out to roughly $13 billion with an additional $7.85 billion of debt was listed in the company's bankruptcy petition.
Under the restructuring proposal, Valaris would cancel several shares while swapping equity for its revolving credit facility and unsecured notes.
“The substantial downturn in the energy sector, exacerbated by the Covid-19 pandemic, requires that we take this step to create a stronger company able to adapt to the prolonged contraction in the industry,” Valaris Chief Executive Officer Tom Burke said in his statement. The company plans to continue serving customers uninterrupted throughout the bankruptcy and restructuring period", he said.
The restructuring agreement, which will slash more than $6.5 billion of the companies debt, will convert Valaris’ existing credit facilities and unsecured notes to equity, according to the release.
Existing note holders have already agreed to safeguard approximately $500 million of new notes.
London-based Valaris, which was initially created in 2019 out of the combination of Ensco Plc and Rowan Companies Plc., joins rivals Noble Corp. and Diamond Offshore Drilling Inc. in the pool of companies actively filing for bankruptcy.
Pacific Drilling SA earlier this month announced that it may return to bankruptcy court for the second time in less than three years, and Transocean Ltd., the world’s largest owner of deep-water oil rigs, said it’s exploring several strategic alternatives at this time.
The offshore industry has struggled for years since oil prices plummeted to less than $30 a barrel back in 2016 after reaching more than $100 in mid-2014.
Although newer deep-water projects are far less expensive, they still take longer to plan and develop than land-based shale wells, which are typically more costly, leaving them at a disadvantage as crude oil plummeted even further earlier this year amidst the coronavirus pandemic.
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