Valaris declares Chapter 11 bankruptcy

Valaris, offshore drilling contractor with the world’s largest fleet, has filed for bankruptcy protection in an attempt to restructure its debt.

Valaris said on Wednesday that it voluntarily filed for a Chapter 11 financial restructuring in the United States Bankruptcy Court for the Southern District of Texas.

According to the offshore driller, it aims to pursue an efficient restructuring process and exit Chapter 11 “as soon as possible” and is confident that a comprehensive financial restructuring is “in the best interest of the company and its stakeholders in the long-term”.

It claims that it will have “one of the best balance sheets in the offshore drilling industry” after consummation of the contemplated restructuring transactions.

Valaris further stated that it was confident of running its business normally since it has around $175 million in cash. Also, certain noteholders will provide the company with an additional $500 million of liquidity, with an option to have no cash interest, to support its operations throughout the Chapter 11 process.

As far as the restructuring process is concerned, the company entered into restructuring agreements with approximately 50 per cent of its noteholders, to undergo “a financial restructuring that is intended to reduce its debt load substantially, support continued operations during the current lower demand environment, and provide a robust financial platform to take advantage of market recovery over the long term“.

The agreement will fully equitize the company’s pre-petition revolving credit facility and unsecured notes, a fully backstopped rights offering to noteholders for $500 million of new secured notes, the effective cancellation of existing equity interests in the company in exchange for, in certain circumstances, warrants for post-emergence equity and payment of trade claims in full in cash.

Valaris added that would work with its other creditors and stakeholders who have not signed the restructuring support agreement to advance the company’s efforts to restructure its balance sheet.

Tom Burke, president and CEO of Valaris, said: “The substantial downturn in the energy sector, exacerbated by the COVID-19 pandemic, requires that we take this step to create a stronger company able to adapt to the prolonged contraction in the industry and to continue to enhance our position as overall market conditions improve.

“We have taken several steps to right-size and streamline our organization in line with our goal to be the offshore drilling cost leader. Now, we intend to use this restructuring to complement these measures to create a stronger financial structure for the company.

“Valaris will continue to serve our customers uninterrupted through this process, delivering safe and reliable operations, through its highly-capable rig fleet.

“We appreciate the continued support of all of our stakeholders throughout this process, particularly our employees who continue to provide excellent service to our customers amid challenging market conditions […]”.

In related company news, Valaris booked a $3 billion loss in the first-quarter over rig impairments. During the spring, the company faced terminations for several of its drilling contracts on two occasions.

Valaris also faced delisting from the New York Stock Exchange in April after its stock fell under $1.