Ocyan units’ Chapter 15 bankruptcy cases closed by court

By Sarah Lizee

Olympia, Wash., Sept. 19 – Ocyan SA subsidiary ODN I Perfuracoes Ltda. and seven of its affiliates had their Chapter 15 bankruptcy cases closed by the U.S. Bankruptcy Court for the Southern District of New York on Monday, according to an order.

As previously reported, the company gained U.S. court recognition in May of their Brazilian extrajudicial reorganization proceedings that started in December 2022.

As background, Ocyan was formerly Odebrecht Oleo e Gas SA, which made a Chapter 15 filing in 2017 to gain recognition of prior Brazilian proceedings. That case was closed in 2020.

The debtors form part of the Ocyan group’s drilling business.

A foreign representative for the debtors said that a combination of macroeconomic and industry-specific factors necessitated the relief provided under the more recent reorganization plan.

Since the first quarter of 2021, the debtors, with the assistance of their advisers, Davis Polk & Wardwell LLP as New York counsel, E. Munhoz Advogados as Brazilian counsel and Lazard Assessoria Financeira Ltda. as financial adviser, have taken steps to negotiate the restructuring with an informal group of noteholders.

Those negotiations ultimately led to a plan that had the support of holders of about 71% of $761 million 2021 tranche 2 notes and about 57% of $1.97 billion 2022 tranche 2 notes.

The restructuring was to be effectuated through the transfer of the drilling business to a new holding company (DrillCo) domiciled in Luxembourg.

DrillCo would issue new secured notes to tranche 2 noteholders in exchange for their notes and a $197 million new money investment to fund the company going forward.

DrillCo would also issue about $300 million of the new notes, which would bear interest at 7˝% per annum, payable quarterly in cash, and would mature in seven years.

Participation in the new money investment was open to all noteholders on a ratable basis.

On the effective date of the restructuring, DrillCo was to issue the plan consideration elected by each noteholder in exchange for their tranche 2 notes.

Each noteholder had until Feb. 8, 2023 to pick one of the following five options under the exchange:

• New notes, DrillCo equity in the form of class B voting shares and class C non-voting shares, and any deferred cash remaining after funding the new money investment;

• New notes, class B voting shares, unsecured convertible notes and any deferred cash remaining after funding the new money investment;

• Debt service reserve accounts (DSRA) deferred cash, new notes and DrillCo equity in the form of class B voting shares and class C non-voting shares;

• Cash, new notes, class B voting shares and unsecured convertible notes; and

• DSRA deferred cash and new notes.

Noteholders who chose one of the first two options listed were also to receive consideration on account of their new money investment. Option 1 noteholders were to receive new notes and DrillCo equity in the form of class B voting shares and class C non-voting shares. Option 2 noteholders were to receive new notes, class B voting shares and unsecured convertible notes.

Noteholders were allowed to fund their new money investment by waiving their right to receive pro rata cash payments that would otherwise be payable to them as plan consideration.

Under a backstop commitment agreement, some noteholders agreed to fund any portion of the new money investment not elected by other noteholders.

The unsecured convertibles were exchangeable for a certain amount of class C non-voting shares at the holder’s election or automatically upon the occurrence of certain mandatory exchange events.

The convertibles mature 20 years after their issue date and bear interest at 0.5% per annum, payable semiannually in cash or in kind.

By the election deadline, holders of 51.84% of tranche 2 notes chose the first option, holders of 39.57% of tranche 2 notes chose the second option, holders of 1% of tranche 2 notes chose the third option (which was the default option), holders of 0.28% of tranche 2 notes chose the fourth option, and holders of 1.65% of tranche 2 notes chose the fifth option.

Because not all noteholders chose one of the first two options, which include the new money investment, the backstop parties were to fund their backstop investment.

The Brazilian court confirmed the restructuring plan on March 20, 2023. The debtors had to obtain an order from the U.S. court recognizing the Brazilian proceedings and enforcing the plan and the Brazilian confirmation order for the plan to go effective.

The Chapter 15 case number for ODN I Perfuracoes was 23-10557. The filing was made on April 11.

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