Legal Business Blogs

Dealwatch: Elite firms drill into $7.1bn Valaris restructuring as eclectic deals epitomise market

In what has been called an ‘extraordinary case’, Valaris’ $7bn financial restructuring made sizeable waves this week, as firms including Kirkland & Ellis, Slaughter and May and Akin Gump steered it to a successful conclusion.

The transaction sees offshore drilling service provider Valaris emerge from Chapter 11 after the company filed in August 2020, eliminating $7.1bn of debt and securing a $520m capital injection through the issue of $550m of new secured notes.

The restructuring – which was subject to a range of complex conditions, including Saudi and Mexican antitrust approvals – was implemented through a UK administration proceeding and culminated in the pre-pack sale of the business and assets of Valaris to a newly-incorporated Bermuda company owned by the company’s existing creditors. Jonny Marston and Mark Firmin of Alvarez & Marsal Europe were appointed as joint administrators of Valaris. The common stock and warrants of the new parent company of the Valaris group started trading on the NYSE on 3 May 2021.

Valaris fielded strong teams from Slaughters and Kirkland, with the latter team led by Chicago partners Anup Sathy, Ross Kwasteniet and Spencer Winters.

The Slaughters team advising Valaris was led by restructuring partner Ian Johnson and corporate partner Hywel Davies, together with corporate partner Christian Boney and financing partner Samay Shah.  Mike Lane advised on tax and antitrust advice was provided by partner Will Turtle, while partner Peter Wickham handled dispute resolution matters.

A separate Slaughters team, led by restructuring partner Tom Vickers and supported by Rebecca Davies, is advising the joint administrators of Valaris.

In London, Akin Gump financial restructuring partner James Terry was lead adviser to the ad hoc group of noteholders, with the team also including Hong Kong partner Naomi Moore, London competition partner Davina Garrod, finance partner Stephen Peppiatt, financial regulatory partner Ezra Zahabi, tax partners Stuart Sinclair and Sophie Donnithorne-Tait, international trade partners Chiara Klaui and Christian Davis, corporate partner Vance Chapman and UAE corporate partner Rizwan Kanji.

Kramer Levin Naftalis & Frankel in New York acted as lead and US counsel to the ad hoc group of priority guaranteed noteholders and Texas counsel to the ad hoc group of noteholders was provided by Porter Hedges partners John Higgins and Shane Johnson.

Akin Gump’s James Terry noted of the transaction: ‘This was an extraordinary case. It started with $7bn of debt, holders of multiple series of bond debt issued by five separate entities within the structure, a huge piece of litigation launched by the Rowan bondholders, an activist equity investor with board representation, and a revolving bank lender group with claims that were structurally senior to the bonds. In little over a year, it resulted in the company and the stakeholders uniting to create a de-levered balance sheet and a strong liquidity position for the business going forward.

‘It was a great example of global-cooperation between law firms with Akin Gump providing English, Hong Kong, German, UAE and international antitrust advice to our clients alongside their lead Chapter 11 counsel, Kramer Levin.’

Slaughters’ partner Ian Johnson, added: ‘As Valaris was incorporated in England and Wales, it was necessary to consider parallel English proceedings and, following detailed discussions in the Chapter 11, the agreed restructuring was implemented by way of a pre-packaged administration sale of the business and assets of Valaris to a newly-incorporated Bermuda company owned by its existing financial creditors. This follows other recent examples of debtors using parallel Chapter 11 and UK procedures in order to implement restructurings, including Paragon Offshore.

‘In confirming the Chapter 11 plan on 3 March 2021, Judge Marvin Isgur of the US Bankruptcy Court noted that the plan involved a “full deleveraging” of the group and the confirmation of the plan in eight months as a “remarkable achievement”. Valaris will be well positioned to take advantage of the opportunities going forward as the oil and gas market improves.’

Shearman & Sterling partners Fredric Sosnick and Ned Schodek advised the RCF administrative agent and the global co-chairs of Morrison & Foerster’s business restructuring and insolvency group, Lorenzo Marinuzzi and Jennifer Marines in New York, advised the official committee of unsecured creditors.  The London MoFo deal team was led by Howard Morris. New York Pryor Cashman partner David Smith advised the DIP agent and new secured notes trustee.

Elsewhere, Reed Smith and Kirkland won roles to advise healthcare investor EW Healthcare Partners, on its acquisition of a majority stake in Paris-headquartered pharma company Laboratoires Majorelle.

The Reed Smith team was led by partner Guilain Hippolyte and also included partners Séverine Martel, Natasha Tardif, Daniel Kadar and Sam Webster.

Kirkland advised EW Healthcare Partners on debt finance with a team led by corporate partners Rory Mullarkey and Daniel McMann and including corporate partner Adam Wexner, debt finance partners Chris Shield and Ambarish Dash, as well as tax partners Nadine Gelli, Rachel Cantor and Tim Lowe.

August Debouzy and Odinot & Associés advised the founders and Majorelle.

Finally Kirkland cropped up again, this time opposite Latham & Watkins, on European paytech company Nexi’s €2.1bn bond offering. The proceeds will allow Nexi to prefund both the Nets merger and the SIA merger, extend the tenor of its debt and reduce the cost of debt.

Latham advised the initial purchasers with a team led by London partners Jennifer Engelhardt and Dan Maze. The Kirkland team advising Nexi was led by capital markets partner Matthew, while

Italian firm Legance also advised Nexi and BonelliErede provided tax advice to the banks.