Pacific Drilling emerges from bankruptcy

Offshore drilling contractor Pacific Drilling has completed its balance-sheet restructuring and has emerged from the Chapter 11 process.

Pacific Drilling said on New Year’s Day that the company and each of its debtor affiliates emerged from bankruptcy signalling the implementation of the ‘Modified First Amended Joint Plan of Reorganization of Pacific Drilling S.A. and its Debtor Affiliates under Chapter 11 of the Bankruptcy Code.

The plan was confirmed by the United States Bankruptcy Court for the Southern District of Texas on 21 December 2020.

Under the plan, all of the Pacific Drilling’s outstanding common shares were deemed to have no value and will receive no recovery.

Per the restructuring transactions contemplated by the plan, upon emergence, the company has a new parent company – Pacific Drilling Company LLC – a Cayman Islands-based company, the equity of which is owned by former creditors of the company and its debtor affiliates.

Bernie G. Wolford, CEO of the reorganized company, said: “We are pleased to reach completion of this process. Having now emerged from Chapter 11 with a fully de-levered balance sheet, we are well-positioned to continue to deliver world-class drilling services with our fleet of 6th and 7th generation drillships”.

After emergence, the reorganized version of Pacific Drilling now operates with a substantially de-levered capital structure, due to the elimination of more than $1 billion of funded debt obligations under the plan.

The reorganized company has approximately $100 million in cash on hand, and access to an undrawn $80 million senior secured delayed draw term loan exit facility to support its ongoing operations.

To remind, the offshore driller filed for Chapter 11 bankruptcy protection to eliminate $1.1 billion of bond debt back in November 2020. According to Pacific Drilling, this was necessary due to significant disruption in the offshore drilling market caused by the Covid-19 pandemic.

The impact of these market conditions on Pacific Drilling’s business has been direct and significantly negative, rendering its capital structure unsustainable over the long-term.

In late December 2020, the company said that it would be emerging from Chapter 11 bankruptcy by year-end following the confirmation of its prearranged plan of reorganization.

It is worth reminding that Pacific Drilling had also gone through financial restructuring in late 2017.

The company in November 2017 filed for Chapter 11 bankruptcy to pursue a comprehensive restructuring of its approximately $3 billion in principal amount of outstanding funded debt.

The drilling contractor emerged from bankruptcy after successfully completing restructuring transactions in November 2018.

Pacific Drilling is not the only drilling contractor that filed for Chapter 11 in 2020. Namely, Diamond Offshore started voluntary Chapter 11 proceedings to restructure and strengthen its balance sheet in late April 2020, followed by Noble Corporation and Valaris in August 2020.