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Seadrill settles rescue plan in the nick of time

John Fredriksen's struggling rig company Seadrill will get more than USD 1 billion in fresh capital and will postpone debt payments for several years. The plan will be implemented under US Chapter 11.

Ailing driller Seadrill, controlled by John Fredriksen, presented a rescue plan Tuesday that will see the drilling company receive USD 1.06 billion in fresh capital while also postponing payment of debt totaling USD 5.7 billion for five years.

The plan is supported by 97 percent of the company's three banks, close to 40 percent of bondholders, and a group of investors headed by the majority shareholder, John Fredriksen's Hemen Holding.

The plan will be completed under US Chapter 11, for which Seadrill has applied at a court in Texas and which protects the company against creditor claims during the restructuring.

According to the notice from Seadrill announcing the USD 1.06 billion cash injection, USD 860 million will be shareholder loans and USD 200 million will be equity.

The restructuring of Seadrill, which on paper has been on the verge of collapse – a bankruptcy that would have been on of the biggest in Norway ever – has been underway for more than a year. With the recapitalization of the company, Seadrill's existing shareholders stand to lose close to their entire investments, corresponding to just two percent of the company.

Seadrill's share price since the turn of the year.

According to the press release, the plan will ensure the company's continued operations for the next five years.

"With our improved capital structure, we will be in a strong position to capitalise when the market recovers," says Seadrill CEO Anton Dibowitz in the press release.

Heavily indebted Seadrill, which with 60 rigs is one of the world's biggest drilling rig companies, has been hit hard by the sliding oil price and the slowdown in the global oil sector, and Seadrill's debt and other commitments total an estimated USD 12 billion.

Fredriksen, through his company Hemen Holding, established Seadrill in 2005, and the company expanded in the following years by acquiring rigs and companies, and thus also took out significant loans.

When the oil price plunged in 2014, the good times with several profitable years and large shareholder dividends came to an abrupt end. According to Norwegian news media E24, Seadrill paid out dividends totaling USD 8.1 billion in the years 2008 to 2014.

English Edit: Daniel Logan Berg-Munch

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