Vantage Drilling reaches deal to deleverage OGIL unit via Chapter 11

By Caroline Salls

Pittsburgh, Dec. 2 – Vantage Drilling Co. and wholly owned subsidiary Offshore Group Investment Ltd. and its subsidiaries (OGIL) reached an agreement on a plan to substantially deleverage OGIL’s capital structure, according to a news release.

The agreement was reached with holders of $1.45 billion, or 59%, of OGIL’s secured notes and term loans and holders of 90% of its senior secured asset-backed loan facility.

Vantage said existing term loan lenders and secured noteholders will have the opportunity to participate in a rights offering for $75 million of new second-lien secured financing. This new capital commitment will be backstopped under an agreement to be entered into by some of Vantage’s existing creditors.

Plan terms

The company said the proposed plan calls for a debt-for-equity swap that will result in existing term loan lenders and secured noteholders converting their loans and notes into equity and a share of $750 million of senior subordinated notes due 2030.

The new notes will pay interest through the issuance of additional notes and will have no cash interest rate.

According to the release, Vantage’s and OGIL’s asset-backed revolving credit facility lenders have agreed to extend the maturity of that facility through March 2020, convert revolving loans into term loans, and offer the company access to a $35 million letter-of-credit facility.

All customer, vendor and employee obligations associated with the ongoing business will remain unaffected.

Reorganized OGIL will issue new common shares, and the existing shares of OGIL held by Vantage will be cancelled.

The company said it will receive new common shares in exchange for the promissory note it received for the Vantage parent assets, and those shares are expected to be distributed to the Vantage’s creditors following the effective date of the under its Cayman Islands liquidation.

Plan implementation

To implement the plan, OGIL and its subsidiaries have begun to solicit votes on a pre-packaged plan of reorganization.

OGIL expects to file cases in the U.S. Bankruptcy Court for the District of Delaware on Dec. 3. Separate proceedings in connection with winding down the parent holding company will be filed in the Cayman Islands, but the company said OGIL’s pre-packaged Chapter 11 case will proceed to conclusion separate from Vantage’s Cayman Islands proceedings.

Any parties holding claims against Vantage directly, including its shareholders, are expected to have their claims addressed as part of the Cayman Islands proceedings.

OGIL intends to request bankruptcy court confirmation of its plan in mid-January, the release said.

“Vantage and OGIL have been working on a path forward to deleverage its capital structure and take advantage of market opportunities with a strong balance sheet in light of market conditions, and we are extremely pleased to have our senior debtholders support the company to accomplish these goals, position ongoing operations for the long-term as well as to provide additional capital to supplement our solid liquidity position.” Vantage and OGIL chief executive officer Paul Bragg said in the release.

“The agreement we’ve reached with our lenders and noteholders will eliminate more than $152 million of annual cash interest expense and position us with a strong, deleveraged balance sheet expected to have more than $242 million of cash on hand.

“Our operations around the world are not being impacted.”

Weil, Gotshal & Manges LLP is serving as legal counsel and Lazard Freres & Co. LLC is serving as financial adviser to Vantage and OGIL. Maples and Calder is serving as Cayman Islands counsel to Vantage and OGIL. Alvarez and Marsal is providing financial advisory services to OGIL.

Vantage is an offshore drilling contractor based in Houston.

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