Ocean Rig, subsidiaries’ restructuring effective date occurs Sept. 22

By Caroline Salls

Pittsburgh, Sept. 22 – Ocean Rig UDW Inc. announced Friday that the conditions under the schemes of arrangement for the company and its Drillships Financing Holding Inc. (DFH), Drill Rigs Holdings Inc. (DRH) and Drillships Ocean Ventures Inc. (DOV) subsidiaries were satisfied or waived, and the restructuring effective date has occurred.

“We have been supported throughout by our clients, employees and vendors, and, having been placed on firm financial footing, Ocean Rig looks forward to focusing back on its underlying business,” chairman and chief executive officer George Economou said in a news release.

The company said the schemes provided for substantial deleveraging of the companies through an exchange of $3.7 billion principal amount of debt plus accrued interest for new equity of Ocean Rig UDW, $288 million in cash and $450 million of new secured debt.

Ocean Rig said creditors who submitted an accountholder letter and/or lender claim form with a valid confirmation form by the Sept. 13 deadline have received or are in the process of receiving the scheme consideration to which they are entitled, other than creditors who elected to receive new non-marginable shares.

Financial projections

The company projects that it will have total cash of at least $690 million as of Sept. 30, including about $20 million of restricted cash associated with the Ocean Rig Apollo, assets with a book value of $2.9 billion, including about $570 million associated with newbuilding installments and about $650 million associated with the Ocean Rig Apollo, debt of about $567 million, including about $117 million associated with the Ocean Rig Apollo and a backlog of $1.2 billion, including about $109 million in termination fees associated with the Ocean Rig Apollo.

In addition, Ocean Rig said common shares outstanding after completing all of the restructuring issuances will be 91.56 million.

On Thursday, the company canceled 22.22 million of its treasury shares and 56.08 million shares previously held by its Ocean Rig Investments Inc. subsidiary.

In addition, Ocean Rig said it completed a one-for-9,200 reverse stock split of the then-existing shares of its issued common stock on Thursday. Following the reverse stock split, there were 8,975 shares of the stock outstanding.

Share issuance

On Friday, the company issued a total of 90.65 million common shares under the schemes. Of this amount, 82.13 million common shares, together with 895,404 new non-marginable shares, were issued to scheme creditors as part of the consideration for their claims. An additional 8.52 million common shares were issued to a company affiliated with Economou.

Additionally, some scheme creditors who opted to receive new non-marginable shares in lieu of common shares will receive those shares as soon as possible after the adoption of a second amended articles of association and the passing of a resolution to redesignate some common shares as new non-marginable shares at a Nov. 3 extraordinary general meeting.

The release said the new non-marginable shares will be designated as class B convertible common shares and will not be listed on a national securities exchange or a national market system.

New credit agreement

On the restructuring effective date, Ocean Rig and some of its subsidiaries entered into a new $450 million credit agreement with scheme creditors participating in the schemes related to DOV and DFH.

The new senior secured term loan facility will bear interest at 8% and mature on Sept. 20, 2024.

As part of the restructuring, Ocean Rig and each of its vessel-owning subsidiaries each entered into a management services agreement with TMS Offshore Services Ltd., with an initial term of 10 years.

In consideration for these services, the company agreed to pay TMS an annual fee of $15.5 million plus up to an additional $10 million based on the satisfaction of performance metrics. Ocean Rig also agreed to pay a 1% commercial fee on all earnings under any existing drilling contract and any drilling contract entered into after the launch of the TMS agreement.

Governance changes

Upon the adoption of new Ocean Rig UDW articles at the extraordinary general meeting, the company said its board of directors will increase in size to consist of seven directors, of whom three directors will be appointed by some significant lenders and four directors will be appointed by Economou.

Until the later of the fifth anniversary of the restructuring effective date and the day immediately preceding the fifth annual general meeting held after the effective date, the right to remove a director will be limited to the persons entitled to designate that director or for cause by either the affirmative vote of at least two-thirds of the board of directors or a majority of the lender directors.

Under the terms of a governance agreement, consenting shareholders agreed to vote against any proposal to amend the new articles or the winding-up of the company unless the proposal is approved by the board of directors, including a majority of the lender directors.

Also under the new articles, Ocean Rig will not make future issuances of common shares or other securities, pay dividends on common shares, incur or modify debt, amend the articles and engage in other specified actions without the approval of the majority of the lender directors.

Until the three lender directors have been appointed, the company will not be permitted to take any action that would otherwise require the approval of the lender directors.

According to the release, “these veto rights provide the lender directors with significant influence over the company’s operations and strategy, and the lender directors may support proposals and actions with which shareholders may disagree or which are not in shareholders’ interests.”

Ocean Rig said scheme creditors representing at least two-thirds of the shares that will be entitled to vote at the Nov. 3 meeting have granted proxies to vote in favor of adopting the new articles.

Ocean Rig is a deepwater driller based in Nicosia, Cyprus. The company filed for bankruptcy on March 27 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 15 case number 17-10736.

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