Valaris plan confirmed; set to cut $7.1 billion of existing debt

By Sarah Lizee

Olympia, Wash., March 3 – Valaris plc’s Chapter 11 plan of reorganization was confirmed Wednesday by the U.S. Bankruptcy Court for the Southern District of Texas, according to a press release.

In addition to the confirmation, the plan received support from holders of about 80% of the company's unsecured notes and bank lenders representing 100% of the company's credit facility claims.

Also, about 81% of the company's voting shareholders voted to accept the plan.

Upon emergence, which is expected early in the second quarter, Valaris will eliminate $7.1 billion of existing debt, and will receive a $520 million capital injection through the issuance of a $550 million secured note maturing in 2028.

The note includes the option of an 8¼% cash coupon, 10¼% half cash, half paid-in-kind coupon or 12% paid-in-kind coupon, all at the company's election.

Valaris has also reached an agreement with Daewoo Shipbuilding & Marine Engineering Co., Ltd. to amend its two newbuild drillship contracts to extend each delivery date to Dec. 31, 2023, while giving the company the option to take delivery early or terminate the contracts on a non-recourse basis.

Final payments for the Valaris DS-13 and Valaris DS-14 are estimated to be about $119 million and $218 million, respectively.

Under the plan, holders of general unsecured claims will receive payment in full or have their claims reinstated.

The bank lenders will receive their Chapter 11 distributions in either a combination of cash, new ordinary shares of the new parent entity of the company and the right to participate in the rights offering contemplated by the restructuring agreement or entirely in cash and new equity of New Valaris, at their election.

As part of the rights offering, 97.6% of the rights issued will be offered to all record holders of any claim on account of the senior notes, and 2.4% of the subscription rights will be offered to some record holders of credit facility claims.

Additionally, each holder that participates in the rights offering and holdback will receive its pro rata share of 30% of the new equity.

New Valaris will also issue 39% of the new equity to holders of the senior notes and 28.3% of the new equity to holders of claims against Valaris with respect to the credit facility claims.

Finally, all letters of credit outstanding under the fourth amended and restated credit agreement dated as of May 7, 2013 will be replaced or collateralized with cash.

In addition to supporting the plan and second amended restructuring support agreement, some bank lenders also agreed to backstop a portion of the rights offering.

The backstop commitment agreement amendment provides that the participating bank lenders will receive, among other things, 2.4% of the holdback notes and the new secured notes offered in the rights offering.

Valaris is a London-based offshore drilling company. The company filed bankruptcy on Aug. 19, 2020 under Chapter 11 case number 20-34114.

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