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Valaris Plc became the latest victim of the global drop in oil prices, declaring bankruptcy on August 19 as the world’s largest offshore rig owner by fleet size seeks to restructure approximately $ 7 billion in debt. .
The Chapter 11 filing with the U.S. Southern District of Texas bankruptcy court comes after the company said it could be forced to seek creditors protection after skipping bond payments.
Valaris has entered into a binding restructuring support agreement with about half of its noteholders and has received $ 500 million in debtor financing in possession, the company said in a statement. The company listed total assets of around $ 13 billion and total debts of around $ 7.85 billion in its bankruptcy petition. As part of the restructuring proposal, Valaris will cancel shares and exchange for equity its revolving credit facility and unsecured notes.
“The substantial downturn in the energy sector, exacerbated by the COVID-19 pandemic, requires us to take this step to create a stronger company, able to adapt to the prolonged contraction of the industry,” said Tom Burke, CEO of Valaris, in the statement. The company plans to continue serving its customers uninterrupted throughout the life of the bankruptcy, he said.
The restructuring deal, which will reduce debt by more than $ 6.5 billion, will convert Valaris’ existing credit facility and unsecured notes into equity, the statement said. Existing ticket holders have agreed to guarantee $ 500 million in new tickets.
London-based Valaris, which was formed in 2019 as a result of the combination of Ensco Plc and Rowan Companies Plc., Joins rivals Noble Corp. and bankrupt Diamond Offshore Drilling Inc. Pacific Drilling SA announced earlier this month that it could return to bankruptcy court for the second time in less than three years, and Transocean Ltd., the world’s largest owner of deepwater oil rigs, said she was exploring strategic alternatives.
The offshore industry has struggled since oil prices fell below $ 30 a barrel in 2016 after hitting over $ 100 in mid-2014. Although new deepwater projects are cheaper, they still take longer to develop than onshore shale wells and are generally more expensive, putting them at a disadvantage as crude fell earlier this year in the middle of the COVID-19 pandemic.
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