Vantage Drilling Files for Bankruptcy Protection
Vantage Drilling Co., an offshore oil rig operator linked to the massive corruption scandal at Brazil’s state-run oil firm, filed for bankruptcy protection late Wednesday night after reaching a deal with its lenders and bondholders to swap $1.15 billion in debt for control of the business.
Under the terms of a proposed plan filed in U.S. Bankruptcy Court in Wilmington. Del., on Thursday, Vantage Drilling said the debt-for-equity swap will slash more than $1.6 billion in debt off its books. The restructuring proposal would leave Vantage’s Offshore Group Investment Ltd. subsidiary intact while the Vantage parent company is wound down in the Cayman Islands.
“Vantage and OGIL have been working on a path forward to deleverage its capital structure and take advantage of market opportunities with a strong balance sheet in light of market conditions,” said Paul Bragg, Vantage and OGIL’s chief executive officer.
Like others in the oil-and-gas industry, Houston-based Vantage has been hamstrung by stubbornly low oil prices. Over the past year and a half, the price for U.S. crude oil has dropped from more than $100 a barrel to the low $40s. In the past year, rig operators Hercules Offshore Inc. and Cal Dive International Inc. have also filed for bankruptcy.
Although a depression in oil and gas prices this year compounded troubles for these rig contractors, the offshore drilling sector has been facing an oversupply of drilling rigs since late 2013. With customers turning their focus to onshore shale gas drilling, offshore operations have seen customers reduce their expenditures.
Apart from the industrywide downturn, Vantage has also been buffeted by the corruption scandal at the state-run oil firm Petróleo Brasileiro SA, which was Vantage’s biggest customer.
According to Brazilian prosecutors, a Chinese shipping executive named Hsin Chi Su, also known as Nobu Su, and a Brazilian named Hamylton Padilha, working on behalf of Vantage, agreed to bribe key Petrobras executives and politicians to obtain a lucrative drillship-leasing contract. Mr. Su, a former Vantage director, owns 32.9% of the company, according to court papers. The two men were charged with money laundering and corruption by Brazilian prosecutors in August.
Mr. Padilha has entered into a plea agreement with the Brazilian prosecutors and admitted he participated in the bribery of certain Petrobras executives.
Vantage said in court papers filed Thursday that to the extent Mr. Padilha committed any illegal acts, he did so acting on his own behalf and not for the company. Neither Mr. Bragg nor any other directors or officers of Vantage or its subsidiaries has been indicted by the Brazilian prosecutors.
Representatives for Vantage didn’t respond to requests for comment. Mr. Su and Mr. Padilha couldn’t be reached for comment.
Vantage’s deal with its lenders and bondholders slashes $152 million in annual interest expense and will leave the company with $242 million of cash on hand. It lost $6 million on revenue of $638.4 million in the first nine months of the year.
Vantage, which listed total assets of $3.5 billion and debt of $3 billion in bankruptcy court papers, employs 190 people. It intends to stay open during the bankruptcy case and business operations will be unaffected.
The company is hoping for a quick trip through bankruptcy court. It is asking the court to schedule a hearing for Jan. 14 to approve its restructuring plan.
Vantage is scheduled to make its debut before U.S. Bankruptcy Judge Brendan Linehan Shannon on Friday in Wilmington.
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