Rescue financing implemented through a Cayman scheme of arrangement
Davis Polk advised the indenture trustee on a $15 million debtor-in-possession rescue financing facility for Schahin II Finance Company (SPV) Limited. The indenture trustee, acting at the direction of majority noteholders of the $750 million notes due 2023, filed for a scheme of arrangement of the issuer in the Cayman Islands to implement the new financing, the proceeds of which will be used to fund ongoing maintenance for the Sertão, a Marshall Islands-flagged drillship. As part of the Cayman scheme, the existing indenture was amended to permit the new financing. The new financing was fully backstopped by certain noteholders. The transaction is particularly notable as it represents one of the first instances of a Cayman scheme being used for rescue financing. The scheme was recognized under Chapter 15 and granted full force and effect in the United States by the Bankruptcy Court for the Southern District of New York.
The issuer of the 2023 notes is a Cayman Islands exempt company, and the notes were originally issued to finance the construction of the Sertão. The Sertão was chartered to Petrobras and operated in Brazil. In April 2015, a Steering Committee organized and began working with Davis Polk and the indenture trustee on a comprehensive exercise of remedies. Remedies included installing independent managers at Dleif Drilling (the owner of the Sertão) and arresting the Sertão through a U.K. admiralty proceeding. The Sertão is currently warm stacked in the United Kingdom.
The Davis Polk restructuring team included partner Timothy Graulich and associates Natasha Tsiouris, Stephen D. Piraino and Dylan A. Consla. Stephen Hood, James Vickers and Drew Glover provided capital markets advice. Partner Mario J. Verdolini provided tax advice. Members of the Davis Polk team are based in the New York and São Paulo offices.