Seadrill Ltd (NYSE: SDRL) is having an overwhelmingly positive day in the market today after announcing that it has reached a restructuring agreement following the news of Chapter 11 bankruptcy. While the deal all but wipes shareholders out, excitement that the company will survive seems to be pushing the stock toward the top. As is nearly always the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:33), SDRL is trading at $0.27 per share after a gain of $0.05 per share or 19.81% thus far today.
SDRL Announces Restructuring Agreement
As mentioned above, Seadrill is having an incredibly strong day in the market after announcing that it has filed for Chapter 11 bankruptcy after closing a deal with banks and a minority bondholder. As a result of the deal, the company will receive $1 billion in new capital as well as extend or convert about $8 billion of loans into equity in the company.
According to the terms of the agreement, SDRL will be receiving $860 million in secured loans. On top of that, the company will be getting an additional $200 million through the sale of new equity. Bank lenders have also agreed to defer maturities on all secured credit facilities, which come to a total of $5.7 billion. These maturities will be deferred until the year 2020 and debt covenants have been rewritten. Finally, SDRL will be asking its unsecured creditors to convert $2.3 billion of unsecured bonds and other unsecured claims into a 15% equity stake in the company.
Shareholders All But Wiped Out
While the restructuring agreement will allow Seadrill to stay alive, shareholders have been all but wiped out in the deal. In fact, following the agreement, the shareholders will be left with only 2% of the post-restructuring company. While that’s a big cut to ownership, the company’s largest shareholders have given support to the deal and have even agreed to new capital investments.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will be keeping a close eye on SDRL. In particular, we’ll be following the company through the restructuring process and interested to see where things go from here. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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