Paragon Offshore submits new plan based on lender support agreement

By Caroline Salls

Pittsburgh, Feb. 8 – Paragon Offshore plc filed a new plan of reorganization and related disclosure statement with the U.S. Bankruptcy Court for the District of Delaware based on an agreement in principle reached in January with a steering committee of lenders under its senior secured revolving credit agreement and an informal committee of senior secured term loan lenders.

According to an 8-K filed with the Securities and Exchange Commission, the new plan provides for the elimination of $2.4 billion of the company’s previously existing debt in exchange for a combination of cash, debt and new equity.

Secured lenders will receive new senior first-lien debt maturing in 2022 in the original principal amount of $85 million. As previously reported, interest will accrue at a rate of Libor plus 600 basis points, payable in kind or in cash, with a minimum of 1% of the interest to be paid in cash.

Secured lenders are also projected to receive $418 million in cash, subject to adjustment on account of claims reserves and working capital and other adjustments at the time of emergence from bankruptcy, and an estimated 58% of the new equity of the reorganized company.

The projected distribution to holders of the company’s 6¾% senior unsecured notes due July 2022 and 7¼% senior unsecured notes due August 2024 will be $47 million in cash, subject to adjustment on account of claims reserves and working capital and other adjustments at the time of emergence from bankruptcy, and an estimated 42% of the new equity of the reorganized company.

The plan also calls for an administration of Paragon in the United Kingdom to implement a sale of all or substantially all of the assets of Paragon to a new holding company.

Existing shareholders will not receive a recovery under the new plan.

The court denied confirmation of the company’s first amended plan in October, in part because the court believes that Paragon will require additional liquidity upon emergence.

Under that plan, the revolver would have been modified to include a $165 million cash paydown with the balance of $631 million converted to a term loan due in 2021 at an interest rate of Libor plus 450 basis points with a 1% Libor floor.

The bondholders would have collectively received $285 million of cash, as well as a $60 million note due 2021.

The equity ownership of the bondholders would have increased to 47% from 35%, allowing existing shareholders to retain a majority of the equity in the company.

Paragon, a Houston-based provider of offshore drilling rigs, filed for bankruptcy on Feb. 14, 2016. The Chapter 11 case number is 16-10386.

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