Paragon Offshore amended plan confirmed; early July emergence expected

By Caroline Salls

Pittsburgh, June 7 – Paragon Offshore plc’s fifth amended plan of reorganization was confirmed Wednesday by the U.S. Bankruptcy Court for the District of Delaware.

According to a company news release, Paragon plans to emerge from Chapter 11 bankruptcy in early July, subject to the completion of specified conditions, including the restructuring of the company’s legal entity.

Under the plan, Paragon’s existing equity will be deemed worthless and its secured creditors and unsecured bondholders will receive equity in a new reorganized parent company.

In May, Paragon Offshore reached an agreement with a steering committee of holders of its senior secured term loan maturing 2021, a steering committee of holders of its senior secured revolving credit agreement maturing July 2019 and the official committee of unsecured creditors on a revised consensual plan of reorganization.

As with the previous plan, $2.4 billion of existing debt will be eliminated under the consensual plan in exchange for a combination of cash and to-be-issued new equity.

The current debt consists of $642 million related to term lender claims, $756 million related revolving credit facility claims and $1 billion related to noteholder claims.

The secured lenders will receive their share of $410 million in cash and 50% of the new, to-be-issued common equity, subject to dilution.

The noteholders will receive $105 million in cash and an estimated 50% of the new, to-be-issued common equity, subject to dilution.

As with the fourth plan, existing equity will be deemed valueless through an administration of the company in the United Kingdom, and current shareholders are not expected to have any recovery.

Elements of the plan that remain unchanged include allocation to the secured lenders of new senior secured first-lien debt in the original principal amount of $85 million maturing in 2022. Interest on the new debt will be Libor plus 600 basis points, payable quarterly in-kind or in cash at the company’s discretion with a minimum of 1% of interest to be paid in cash.

In addition, the new debt will allow the company to obtain up to $35 million of letters of credit senior to the new debt.

Existing letters of credit will remain in place.

The sale-leaseback arrangement for the company’s Prospector rigs also remains in place.

As previously reported, Neville Barry Kahn and David Philip Soden were appointed joint administrators of Paragon Offshore on May 23. The affairs, business and property of the company are managed by the joint administrators.

Weil, Gotshal & Manges LLP is serving as legal counsel to Paragon, and Lazard is serving as financial adviser.

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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