Vantage Drilling Co. (OTC PINK: VTGDF) and Offshore Group Investment Ltd. and its subsidiaries (collectively, OGIL), have reached agreement on a plan to substantially deleverage OGIL's capital structure with holders of $1.45 billion, or 59%, of its secured notes and term loans as well as holders of 90% of its senior secured asset backed loan facility.
Existing term loan lenders and secured noteholders will have the opportunity to participate in a rights offering for $75 million of new second lien secured financing. This new capital commitment will be backstopped pursuant to an agreement to be entered into by certain of Vantage's existing creditors.
Among other things, the plan provides for a debt-for-equity swap that will result in existing term loan lenders and secured noteholders converting their loans and notes into equity and a pro rata share of $750 million of senior subordinated notes. The new notes will pay interest through the issuance of additional notes (PIK notes) and will have no cash interest rate burden. Vantage's and OGIL's asset backed revolving credit facility lenders have agreed to extend the maturity of that facility through December 2019, convert revolving loans into term loans and offer the company access to a $32 million letter of credit facility. All customer, vendor and employee obligations associated with the ongoing business will remain unaffected.
To implement the plan, and having now secured the support of the holders of OGIL's debt referenced above in favor of the deleveraging transaction through comprehensive support agreements, OGIL and its subsidiaries have begun to solicit votes on a prepackaged plan of reorganization. OGIL expects to begin cases in the US Bankruptcy Court for the District of Delaware on Dec. 3.
Separate proceedings in connection with winding down the parent holding company will be commenced in the Cayman Islands. OGIL's prepackaged Chapter 11 case will proceed to conclusion separate from Vantage's Cayman Islands proceedings. Any parties holding claims against Vantage directly, including its shareholders, are expected to have their claims addressed as part of the Cayman Islands proceedings. OGIL intends to request Bankruptcy Court confirmation of its plan in mid-January 2016.
"Vantage and OGIL have been working on a path forward to deleverage its capital structure and take advantage of market opportunities with a strong balance sheet in light of market conditions, and we are extremely pleased to have our senior debtholders support the company to accomplish these goals, position ongoing operations for the long term, as well as to provide additional capital to supplement our solid liquidity position," said Paul Bragg, Vantage and OGIL CEO. "The agreement we've reached with our lenders and noteholders will eliminate more than $152 million of annual cash interest expense and position us with a strong, deleveraged balance sheet expected to have more than $242 million of cash on hand.”
Bragg added that the company’s operations around the world are not being impacted. Through its fleet of seven drilling units, Vantage is a provider of offshore contract drilling services globally to oil and natural gas companies.
Weil, Gotshal & Manges LLP is serving as legal counsel and Lazard Freres & Co. LLC is serving as financial advisor to Vantage and OGIL. Maples and Calder is serving as Cayman Islands counsel to Vantage and OGIL. Alvarez and Marsal is providing financial advisory services to OGIL.