Off-shore driller tumbles into Chapter 11 bankruptcy

February 15 22:50 2016

Oil driller Paragon Offshore tumbled into Chapter 11 bankruptcy Sunday, becoming the latest victim of rock-bottom oil prices in a year likely to see more energy companies face insolvency. Paragon said it had won support from a large majority of its unsecured and secured creditors to slash $1.1 billion in debt through bankruptcy, giving the rig operator a good shot at reemerging with a sustainable balance sheet.

But the bankruptcy reflects what analysts say is the latest in a string of energy bankruptcies. Drillers are particularly susceptible as oil companies cut back considerably on production amid a global glut of crude. “Paragon has acted proactively to strengthen the company’s balance sheet in this challenging environment,” Paragon CEO Randall D. Stilley said in a statement. “We look forward to moving as quickly as possible through this process while maintaining our focus on delivering safe, reliable, and efficient operations.”

The company said that 77% of its unsecured bondholders had already agreed to support its restructuring plan, in addition to 96% of its secured credit line bondholders. As part of the deal, shareholders would own 65% of the company after bankruptcy, while bondholders would own 35%.

Paragon said the bankruptcy would have “very little impact” on employees, with no effect on compensation or benefits. The U.K.-based company filed for bankruptcy in Delaware, which is legally allowable because it has U.S.-based legal entities.