September 6, 2022 – The Court hearing the LaForta – Gestao e Investimentos case issued an order: (i) approving proposed bidding procedures for the sale of the Debtor’s assets (ie, the semisubmersible drilling rig "La Muralla IV"), and (ii) approving a timetable culminating in a November 2, 2022 auction and a November 15, 2022 sale hearing [Docket No. 107]. The Debtor has not yet identified a stalking horse.
The motion notes that DIP and secured prepetition lenders lenders holding @$1.0bn in claims have agreed to "Credit Bid Caps" in order to avoid bid chilling, but have yet to disclose what those caps will be (with a commitment to do so by September 27th). The motion provides: "the Backstop Lenders, on behalf of the DIP Lenders and/or Noteholders, as the case may be, have agreed to cap any credit bid they make for the Assets. By September 26, 2022, the Backstop Lenders shall notify the Debtor of the Proposed Purchase Prices above which they will not submit a credit bid if (a) they believe as of the Bid Deadline they will be able to execute a bareboat charter for LMIV and (b) if they do not expect, as of the Bid Deadline, to execute a bareboat charter for LMIV (the 'Credit Bid Caps'). By September 27, 2022, the Debtor will file with the Court and post to the Data Room a notice of the Credit Bid Caps. In addition, the Backstop Lenders, on behalf of the DIP Lenders and/or Noteholders, as the case may be, may disclose a minimum clearing price concurrently with the Credit Bid Caps."
Case Status
On June 16th, the Debtor filed for Chapter 11 protection noting estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $1.0bn and $10.0bn. At filing, the Debtor, owner of a ten-year old, sixth-generation, ultra-deepwater semisubmersible drilling rig (the “La Muralla” or the “Rig”) then lying idle in the Gulf of Mexico, detailed its desperate circumstances (“La Muralla is not currently chartered. It is running low on fuel and has no liquidity with which to acquire more fuel. It does not have a functioning anchor (perhaps no anchor at all). It is under-crewed. It is currently prevented from moving by the harbormaster until a ‘no dispatch’ order is resolved. It is uninsured…” see “Events,” below) and its aspirations as to an asset sale process. firs, however, the Debtor needs the financing to get the Rig “moved from its current position to a port in the Bahamas where it can safely be more fully repaired and can remain while a sale process is conducted.”
On July 13th, the Court hearing the LaForta – Gestao e Investimentos case issued an order authorizing the Debtor to access the $9.5mn balance of a $33.0mn new money, debtor-in-possession (“DIP”) financing facility being provided by certain prepetition lenders; the first $23.5mn having been made available by a June 17th interim DIP order. The proceeds of the DIP financing are earmarked to preserve and stabilize the Rig before the upcoming hurricane season, obtain needed insurance, fund this case, and to conduct a marketing process for the Debtor’s sole asset—the Rig.
As noted in the Debtor's motion, the Rig has completed its 1,100 nautical mile journey across the Gulf of Mexico (busy U.S. ports having been unwilling to accomodate it) and is now safely in "Freeport Harbour and [with] maintenance and pre-inspections under way, the Debtor is ready to begin marketing LMIV for sale." 
Bidding Procedures Motion
The Debtor's August 25th bidding procedures motion [Docket No. 92] states, “The Debtor seeks approval of the Bid Procedures…to establish a clear and open process for the solicitation, receipt, and evaluation of bids on a timeline that would allow the Debtor to consummate a sale of the Assets prior to the scheduled maturity date of the DIP Facility on December 16, 2022.”
The motion continues: “The Debtor filed this chapter 11 case to pursue a viable path for realizing value for its lone asset, La Muralla IV, a ten-year old, sixth-generation, ultra-deepwater semi-submersible drilling rig (the ‘LMIV’). The Debtor believes a robust and open marketing process is the best opportunity to maximize value for the benefit of its stakeholders.
The Debtor is working with various professionals to survey LMIV and perform baseline repairs to prepare the rig for sale and the expected in-person inspections potential bidders will perform as part of their due diligence. As part of this ‘pre-inspection’ period, the Debtor is conducting a 360-degree visual survey of LMIV…
With the safe arrival of LMIV in Freeport Harbour and maintenance and pre-inspections under way, the Debtor is ready to begin marketing LMIV for sale. Specifically, the Debtor is offering to sell (the ‘Sale’) substantially all of its assets, which is LMIV (including all Debtor-owned assets and equipment onboard), and to transfer to the Winning Bidder any contracts the Debtor entered into postpetition that are not terminated on or before consummation of the Sale (collectively, the ‘Assets’)….
The Debtor has carefully designed the Bid Procedures to attract active bidding from potential purchasers and contractors and to maximize the sale value for the Assets in the current market, based on the Debtor’s advisors’ experience with similar sales for maritime vessels. The Debtor is confident the Bid Procedures will allow the Debtor to solicit offers and conduct a sale in a controlled, fair, and open fashion that will encourage participation by financially capable bidders.
In particular, the Bid Procedures contemplate an open auction process with minimum barriers to entry and provide potential bidders with ample time to perform due diligence — including in-person inspections of LMIV — and acquire the information necessary to submit timely and well-informed bids. The Debtor also actively negotiated with the Backstop Lenders to include in the Bid Procedures the Credit Bid Caps to ensure the nearly $1 billion in DIP Lender and Noteholder claims did not chill bidding. To further encourage robust bidding from third parties, the Backstop Lenders have the option to set a floor price.
The Bid Procedures provide the Debtor with an opportunity to consider competing bids and select the highest or otherwise best offers for the completion of the sale. As such, all creditors can be assured that the consideration obtained will be fair and reasonable, and at or above market.”
Key Dates
- Bid Deadline: October 26, 2022
- Auction (if needed): November 2, 2022
- Notice of Winning Bid: November 4, 2022
- Sale Objection Deadline: November 11, 2022
- Sale Hearing: November 15, 2022
- Target Sale Consummation: November 30, 2022
Background
Prepetition Capital Structure
As of the Petition Date, the Debtor had the following indebtedness:
- Approximately $947.0mn principal outstanding with respect to the Prepetition Bonds, plus accrued and unpaid interest and other charges and fees, which is secured by substantially all of the Debtor’s assets.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Weinhoffer Declaration”), David Weinhoffer, the Debtor's chief restructuring officer, detailed the events leading to LaForta’s Chapter 11 filing. The Weinhoffer Declaration provides: “The Debtor filed its chapter 11 case because it has no money, no revenue stream, likely over $1 billion in secured debt and an uncertain path to realizing value from a sole asset. The asset requires material investment and attention to maintain and return to an active operating state. The asset is La Muralla IV [which currently sits about four miles off the coast of Tampico, Mexico], a ten-year old, sixth-generation, ultra-deepwater semisubmersible drilling rig (the 'La Muralla').
La Muralla is not currently chartered. It is running low on fuel and has no liquidity with which to acquire more fuel. It does not have a functioning anchor (perhaps no anchor at all). It is under-crewed. It is currently prevented from moving by the harbormaster until a 'no dispatch' order is resolved. It is uninsured. The Debtor, its parent, and certain of its noteholders have been working to find a solution for quite some time. At this point, there is no alternative to chapter 11."
The Weinhoffer Declaration continues, "Following a reduction in charter fees for La Muralla in 2017, the PEMEX charter agreement for La Muralla was terminated in November 2019. Shell chartered La Muralla for approximately five months ending in August 2021. La Muralla has otherwise not been generating revenue. La Muralla was not 'stacked,' but rather has been kept at or close to operational condition — though with reduced crew, operations and expenditures — in hopes of rapidly deploying for a new charter. the repayment of that loan in full, and as required under the terms of the Secured Notes indenture, LaForta acceded as a guarantor of the notes and granted a mortgage in connection with that guaranty. Similarly, the PEMEX charter agreements with respect to the Centenario GB and Bicentenario were terminated due to lack of budget and drilling opportunities. A sale of the Centenario GB is in process. The Bicentenario ran ashore in January 2022.
ODH, LaForta, the other subsidiary guarantors, and an ad hoc group of Secured Notes holders (the 'Noteholder Group'), have been engaged in discussions for several years regarding the best way to preserve and maximize value for stakeholders. The Secured Notes matured in September 2020, and have been in default since mid-2020.
About four years ago, the Noteholder Group engaged Rothschild & Co. to represent them. Over two years ago, they engaged Milbank LLP. At the time, the members of the Noteholder Group held over 50% of Secured Notes. Since then, certain members of the Noteholder Group advanced and accrued obligations of approximately $9 million to (a) engage advisors to (i) evaluate the Rigs’ operational expenses, (ii) monitor the Rigs’ operations, (iii) advise on preserving and maximizing the value of the Rigs and (iv) discuss such issues with the Debtor and ODH and (b) recently, pay for fuel and advance funding necessary to prepare to commence this chapter 11 case. The participating noteholders took on these costs with the goals of preserving the Rigs and maximizing their value for the benefit of all holders of the Secured Notes….
LaForta and the Noteholder Group are still soliciting a new charter for La Muralla. However, in light of the ongoing cash burn, they determined that LaForta required financing, which would not be available outside of bankruptcy, and that a sale of La Muralla through a chapter 11 case will best preserve and maximize value for all stakeholders….
Significant Shareholders
Offshore Drilling Holdings S.A. holds 100% of the Debtor's equity interest.
About the Debtor
LaForta is a private limited liability company organized under the laws of the Portugal. LaForta is a wholly owned subsidiary of non-debtor Offshore Drilling Holding S.A., a private limited liability company incorporated under the laws of the Grand Duchy of Luxembourg. ODH is one business among several Mexico-based companies wholly or indirectly owned by ODH’s ultimate owners. LaForta is one of three “sister” companies wholly owned by ODH that each hold a single ultra-deepwater semi-submersible drilling rig (the other companies’ rigs are the Centenario GR and the Bicentenario (together with La Muralla, the “Rigs”)) The asset is La Muralla IV, a ten-year old, sixth-generation, ultra-deepwater semisubmersible drilling rig.
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The post LaForta – Gestao e Investimentos – With Rig Now Safely in Freeport Harbour and Maintenance Underway, Court Approves Bidding Procedures for Sale of La Muralla IV and Schedules November 15th Sale Hearing appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.