Valaris announced that it has entered into a binding Restructuring Support Agreement (the RSA) and Backstop Commitment Agreement (the BCA) with approximately 50% of its noteholders (consenting noteholders). Valaris will undergo a financial restructuring that is intended to reduce its debt load substantially, support continued operations during the current lower demand environment and provide a robust financial platform to take advantage of market recovery over the long term.
The RSA and the BCA contemplate, among other items, the full equitization of the company’s pre-petition revolving credit facility and unsecured notes, a fully backstopped rights offering to noteholders for $500 million of new secured notes, the effective cancellation of existing equity interests in the company in exchange for, in certain circumstances, warrants for post-emergence equity and payment of trade claims in full in cash.
To implement the terms of the RSA and the BCA, Valaris voluntarily filed for a Chapter 11 financial restructuring in the US Bankruptcy Court for the Southern District of Texas.
Valaris aims to pursue an efficient restructuring process and exit Chapter 11 as soon as possible, believing that a comprehensive financial restructuring is in the best interest of the company and its stakeholders in the long-term.
The company remains confident that it will be able to maintain liquidity and operate in the ordinary course of business as a result of having approximately $175 million in cash and committed debtor-in-possession financing from certain of its noteholders to provide the company with an additional $500 million of liquidity, with an option to have no cash interest, to support its operations throughout the Chapter 11 process.
“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, and to continue to enhance our position as overall market conditions improve,” Tom Burke, President and CEO of Valaris, said.
“We have taken several steps to right-size and streamline our organization in line with our goal to be the offshore drilling cost leader,” Mr Burke added. “Now, we intend to use this restructuring to complement these measures to create a stronger financial structure for the company. Valaris will continue to serve our customers uninterrupted through this process, delivering safe and reliable operations, through its highly-capable rig fleet.”
“We appreciate the continued support of all of our stakeholders throughout this process, particularly our employees who continue to provide excellent service to our customers amid challenging market conditions, while upholding the Valaris values of integrity, safety, excellence, respect, ingenuity, and stewardship,” Mr Burke concluded.