London-based Valaris and The Woodlands-based Arena Energy are the latest offshore drillers to file gargantuan corporate reorganizations in Houston bankruptcy court.
Valaris, which filed for bankruptcy protection Wednesday in bankruptcy judge Marvin Isgur’s court, said in court filings that it entered Chapter 11 in order to equitize $7.1 billion of funded debt. Valaris and 44 affiliated companies entered the bankruptcy with a restructuring support agreement with their unsecured bondholder group. The agreement includes a a $500 million debtor-in-possession facility and a one-year commitment for a $500 million exit financing.
The debtors turned to lawyers from Kirkland & Ellis’ Chicago office and Texas lawyers from Jackson Walker to handle the bankruptcy. The Jackson Walker team includes Houston lawyers Matt Cavenaugh, Genevieve Graham, Richard Powell, Veronica Polnick, Cameron Secord, Kristhy Peguero and Victoria Argeroplos; Austin lawyer Jennifer Wertz; and Dallas lawyer Vienna Flores Anaya.
British law firm Slaughter and May is also representing the debtors.
Valaris turned to Lazard to serve as its investment banker and Alvarez & Marsal to serve as its restructuring advisor.
New York lawyers from Kramer Levin Naftalis & Frankel and London lawyers from Akin Gump are representing the consenting noteholders. John Higgins, Shane Johnson and Megan Young-John of Porter Hedges are serving as local counsel. Houlihan Lokey is serving as the noteholders’ financial advisor.
Valaris was formed in April 2019 as the result of a merger between Ensco plc and Rowan Companies plc. The company says it currently operates the industry’s largest modern offshore drilling fleet. In a press release, the company said it aims for its restructuring process to be “efficient” and for an exit to occur “as soon as possible.”
“Upon consummation of the contemplated restructuring transactions, Valaris will have one of the best balance sheets in the offshore drilling industry,” the press release says.
As a global company, Valaris’ 30 largest unsecured creditors hail from all over the world. But almost one-third of the creditors had Texas addresses. Deutsche Bank’s New Jersey office is in spot one and two, saying it is owed $2 billion in debt for outstanding senior notes.
The fourth largest unsecured creditor is US Bank, which lists the bank’s corporate trust services department in Houston as the contact. US Bank is also the creditor for Valaris’ sixth, seventh and eighth largest outstanding debts, all for groups of senior notes ranging from $318 million $621 million in value.
Citibank’s Houston office is the fifth largest unsecured creditor, holding a $581 million revolving credit facility for Valaris.
Houston-based rig solutions provider Keppel LeTourneau, Houston-based Schlumberger and Arlington-based Oil States Industries are unsecured creditors for trade debts ranging from $330,731 to $1.3 million in value.
Dallas lawyer Lauren Randle is among a group of Shearman & Sterling lawyers who have already appeared on the docket to advocate for Citi’s creditor rights in the bankruptcy. Meanwhile, Keith Aurzada of Reed Smith’s Dallas office is among a group representing The Bank of New York Mellon, Valaris’ 13th largest unsecured creditor. Sean Wilson of Kelley Drye & Warren’s Houston office is part of a group representing BOKF, which also holds Valaris debt notes.
The case number is 20-34224 in the Houston division of the U.S. Bankruptcy Court for the Southern District of Texas.
Another Day, Another Offshore Driller
Although the Valeris bankruptcy had already racked up 18 entries in the docket by the end of Thursday, Kirkland and Jackson Walker wasted no time filing a voluntary petition the same day for another offshore driller, Arena Energy.
Arena and five affiliates seek to restructure more than $1 billion in debt, which exceeds the $50 million to $100 million that the company lists in assets.
Based in The Woodlands, Arena and its affiliate companies are the most active drillers of new oil and gas wells out of all upstream companies operating on the Gulf of Mexico’s Outer Continental Shelf, court filings say. Athena employs approximately 57 people.
The lawyers representing the debtors include Brian Schartz from Kirkland’s Houston office, Gregory Pesce from Kirkland’s Chicago office and Matt Cavenaugh, Genevieve Graham, Veronica Polnick and Victoria Argeroplos from Jackson Walker’s Houston office.
The consenting term loan lenders are leaning on Milbank and Houlihan Lokey for their legal advice and financial advice.
The federal government takes the cake as Arena’s largest unsecured creditor for a $1.8 million SBA loan. Dallas-based Energy Transfer trails behind in second place, with a trade debt claim worth $1.4 million.
Other Texas companies that are creditors include Houston-based Kinetica Midstream Energy, Houston-based High Point Gas Gathering, Abilene-based Wolfepak Software, Houston-based Garden Banks Gas Pipeline, Houston-based Shred-It USA, Dallas-based Cortex Business Solutions, Houston-based Accudata Systems, The Woodlands-based Wavemedia and Conroe-based First Class Rentals.
A slew of Texas lawyers have already made appearances on the docket on behalf of third parties.
Willkie Farr & Gallagher is representing Lime Rock Partners VIII, LP, which serves as the principal financial sponsor of San Juan Offshore, the proposed plan sponsor. The Willkie team includes Houston lawyers Jennifer Hardy, Michael De Voe Piazza, Jonathan Curth, Bruce Herzog and Steve Torello.
Patricia Tomasco and Elizabeeth Devaney of Quinn Emanuel’s Houston office are representing non-debtor affiliate Arena Offshore.
This bankruptcy has also landed in Judge Isgur’s court. The case number is 20-34215 in the Houston division of the U.S. Bankruptcy Court for the Southern District of Texas.