Paragon Offshore receives OK to modify confirmed Chapter 11 plan

By Caroline Salls

Pittsburgh, July 17 – Paragon Offshore plc received court approval to make some changes to its previously confirmed plan of reorganization, according to an order filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

Paragon also obtained approval to deem the modified plan as being accepted by all creditors in two classes who previously voted in favor of the documents.

The plan was confirmed on June 7.

In connection with two leases, the company’s shares in subsidiary Prospector Offshore Drilling Sarl are pledged in favor of lessor Sino Energy. In order to transfer the Prospector group to reorganized Paragon, consent is needed from the lessor.

Paragon said it has been in negotiations with Sino since May regarding the transfer, but no agreement had yet been reached.

Paragon said it reached an agreement on the related plan changes with the official committee of unsecured creditors and requisite lenders “to preserve the emergence timeline contemplated by the plan and to preserve the value being distributed to creditors under the plan.”

The timeline requires the plan to take effect by July 31.

Plan changes

Under the plan changes, the effective date condition requiring third-party approval for the transfer of the Prospector group will be waived.

In addition, the parent company will not transfer its shares in the Prospector group on or before the effective date, as currently required under the plan.

Instead, Paragon will agree to transfer its shares in Prospector Offshore Drilling to the reorganized company on the earlier of the receipt of consent to the transfer and a waiver of any associated events of default from the lessor and discharge of the lessees’ lease obligations and release of the security over the shares in Prospector Offshore Drilling.

Paragon said it will also enter into a management agreement with its U.K. administrators under which the parent company will pay to reorganized Paragon cash equal to any unencumbered amounts received by the parent company on account of its Prospector shares.

Also under the management agreement, reorganized Paragon will pay specified costs incurred by the parent company and/or the U.K. administrators for debts suffered in connection with their ongoing ownership of the Prospector shares.

Paragon will also arrange management services for the Prospector group, including in accordance with existing services agreements between the lessees and one or more transferred subsidiaries.

According to the motion, any funding that is provided to Prospector group time will be provided by reorganized Paragon or a subsidiary without recourse to the parent company.

Registration rights amendments

The company said some creditors, with the consent of the committee and lenders, also requested changes to a registration rights agreement filed on May 19.

Under those modifications, one demand registration may be made by two or more beneficial holders collectively holding 15% or more of new equity interests at a total offering price of at least $30 million, subject to the consent of reorganized Paragon.

Reorganized Paragon will pay all of the underwriter’s discounts and commissions for the registration.

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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