Pacific Drilling looking to raise $700 million for restructuring

Offshore driller Pacific Drilling has made plans to offer $700 million of senior secured notes with a maturity of five years as part of its financial restructuring.

Pacific Drilling filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York in November 2017 with the aim to optimize its capital structure pending recovery in the floating rig drilling industry.

Through the Chapter 11 process, the driller is looking to pursue a comprehensive restructuring of the company’s approximately $3 billion in principal amount of outstanding funded debt.

Pacific Drilling on Thursday, September 6, 2018, informed that a special purpose wholly owned subsidiary (the Escrow issuer) of the company intended to offer $700 million aggregate principal amount of senior secured first lien notes that mature five years following their issuance, subject to market conditions.

The notes are being offered in connection with the restructuring of Pacific Drilling as part of the first amended joint plan of reorganization filed with the U.S. Bankruptcy Court for the Southern District of New York on August 31, 2018.

According to the plan, the company expects to raise $1.5 billion of new capital comprised of $1 billion in a combination of first and second lien secured notes and $500 million of equity. The plan is meant to strengthen the company’s balance sheet by reducing its leverage and delivering a substantial amount of new capital.

Pacific Drilling said on Thursday that the net proceeds of the offering would be funded into an Escrow account established and maintained by the Escrow issuer.

If Pacific Drilling’s proposed plan is confirmed and certain other conditions are satisfied on or before December 22, 2018, the Escrow issuer will merge with and into Pacific Drilling and Pacific Drilling will become the obligor under the notes.

On the Escrow release date, the notes will be jointly and severally and fully and unconditionally guaranteed on a senior secured basis by each of Pacific Drilling’s restricted subsidiaries and will be secured on a first-priority basis by substantially all of Pacific Drilling’s assets.

Prior to the Escrow release date, the notes will be general obligations of the Escrow issuer, secured only by a lien on the Escrow account. On the Escrow release date, the net proceeds from the offering will be released from the Escrow account to fund a portion of the payments to creditors provided for under the plan.