Lien on five rigs to secure Transocean’s $1.175 billion of senior secured notes due 2030
Offshore drilling contractor Transocean has kicked off a private offering of $1.175 billion of secured notes due in 2030 to cover the redemption of all of the outstanding existing secured notes.
After Transocean announced on Tuesday, 17 January 2023, that Transocean Inc., its wholly-owned subsidiary, had started an offering of $1.175 billion aggregate principal amount of senior secured notes due 2030 to eligible purchasers, the announced offering was priced later that same day. The company confirmed that these notes would be “fully and unconditionally” guaranteed on a senior unsecured basis by Transocean Ltd.
In addition, they are going to be guaranteed on a senior secured basis by certain of Transocean Inc.’s subsidiaries that guarantee the existing 7.75 per cent senior secured notes due 2024 issued by Transocean Phoenix 2 Limited (the Thalassa notes); 5.875 per cent senior secured notes due 2024 issued by Transocean Guardian Limited (the Guardian notes); 6.25 per cent senior secured notes due 2024 issued by Transocean Proteus Limited (the Proteus notes); and 6.125 per cent senior secured notes due 2025 issued by Transocean Pontus Limited (the Pontus notes), which the drilling contractor collectively calls the existing secured notes.
Furthermore, Transocean explains that this will be done in each case up to a secured guarantee cap equal to the principal amount of such notes being refinanced together with any applicable premium, fees and expenses. In line with this, Transocean Inc.’s subsidiaries that guarantee the Thalassa notes, the Guardian notes, the Proteus notes and the Pontus notes, will be subject to a secured limited guarantee cap on the notes equal to $247 million, $320 million, $256 million and $352 million, respectively.
Lien on collateral rigs
Moreover, these notes will also be secured by a lien on the collateral rigs – Deepwater Thalassa, Deepwater Proteus, Transocean Enabler, Transocean Encourage and Deepwater Pontus – and certain other assets related to these rigs, up to the applicable secured limited guarantee cap. The 2016-built Deepwater Thalassa drillship is currently working for Shell in the U.S. Gulf of Mexico (GOM) at a day rate of $480,000. This deal is scheduled to end in February 2026. The 2016-built Deepwater Proteus drillship is also carrying out an assignment for Shell in the Gulf of Mexico, which is currently slated to end in May 2026. The day rate is $481,000.
Additionally, the 2017-built Deepwater Pontus drillship is on a contract with Shell in the Gulf of Mexico until October 2027 and the current day rate is $476,000. On the other hand, the 2016-built Transocean Enabler semi-submersible rig is working for Equinor in Norway at a day rate of $422,000, which is valid until July 2023 when it is expected to decrease to $413,000 until March 2024. The 2016-built Transocean Encourage semi-submersible rig is also hired by Equinor for operations in Norway. The current day rate is $419,000 until March 2023 when it is expected to be lowered to $409,000 until November 2023.
Funding redemption of outstanding secured notes
According to Transocean, all of the net proceeds from the offering will be used to fund the redemption of all of the outstanding existing secured notes – subject to the satisfaction of the conditions precedent – while Transocean Inc. will transfer a portion of the net proceeds from the offering, together with cash on hand to the extent required to complete such redemptions, to each applicable subsidiary issuer of the respective series of existing secured notes, and each such issuer will apply such proceeds to consummate such redemption. This is also subject to the satisfaction of the conditions precedent thereto.
Transocean further outlined that each of the issuers of the existing secured notes had exercised its right to optionally redeem all of its applicable series of the existing secured notes – conditioned upon and subject to the consummation of the offering – at the applicable redemption price for such series.
The firm underlines that redemptions are currently expected to be consummated on 16 February 2023, assuming the satisfaction by such date of the conditions thereto. The notes will bear interest at the rate of 8.75 per cent per annum and the offering is expected to close on or about 31 January 2023, subject to customary closing conditions and other factors.
This offering comes after Transocean started a private offering of $500 million of secured notes due in 2028 earlier this month to cover in part its recent acquisition of the world’s second, eighth-generation drillship, among other things.
As a reminder, Sembcorp Marine completed the delivery of the Deepwater Titan drillship to Transocean’s subsidiary, Triton Titan, at the end of December 2022. This rig is capable of drilling up to 40,000 feet and operating in water depths of up to 12,000 feet.