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Offshore Drilling Stocks Rally on OPEC Announcement

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Why December 11 Is So Important for Seadrill

Upcoming week

The upcoming week is important for Seadrill as the expiration of its go-shop period nears.

Why December 11 Is So Important for Seadrill

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Go-shop period

What is the go-shop period? Seadrill filed for bankruptcy in September 2017, when the company announced its restructuring plan. However, the company is in a go-shop period until December 11, 2017, which means that until that time, market participants can make offers or competing bids for Seadrill. Otherwise put, any offer made on the company should be more attractive than its current restructuring plan.

Seadrill’s restructuring plan

In Seadrill’s restructuring plan, new capital worth $1 billion will be injected into the company, which will consist of $860 million in secured notes and $200 million in equity. Below are a few more key details:

  • Bank debt of $5.7 billion will be extended by about five years, and there won’t be amortization payments due until 2020. Also, the company has significant covenant relief.
  • Seadrill’s unsecured bonds worth $2.3 billion will be converted into 15% equity in the newly restructured company.
  • Existing shareholders won’t be totally wiped out but will get 2% in the post-restructured company.

Seadrill’s future

For this reason, December 11 will mark an end of an important period for Seadrill. From September to December, despite the bankruptcy, Seadrill stock saw some big moves, likely due to hopes that the company will be acquired by another big player in the industry.

Other big players in the industry include Diamond Offshore (DO), Rowan Companies (RDC), Transocean (RIG), and Ensco (ESV)—all of which have been sailing strong during the current downturn.

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