December 21, 2020
Weil advised an ad-hoc committee of creditors in the financial restructuring of KCA Deutag, an international drilling, engineering and technology group. The restructuring was completed on December 21, 2020 and was implemented by way of an English Scheme of Arrangement.
The KCA Group is an international drilling, engineering and technology group serving both onshore and offshore drilling markets which operates in more than 15 countries, with a strong presence in Europe, Russia, Africa and the Middle East.
Before the restructuring, the KCA Group’s total debt stood at approximately $1.9 billion and its net financial leverage at 6.3x. As a result of its high financial leverage, OPEC-related oil price reductions and the COVID-19 Pandemic, the KCA Group entered into negotiations with its creditors, including the Ad-Hoc Committee, which held approximately 63% of the KCA Group’s debt, to agree a restructuring solution.
The KCA Group and its creditors (representing approximately 96.86% by value) entered into or acceded a Lock-Up Agreement dated July 31, 2020.
The financial restructuring, implemented via an English Scheme of Arrangement, saw $1.4 billion of debt, including notes with a principal outstanding value of $1.3 billion, converted to equity in a new Jersey holding company and reinstated senior secured notes of $500 million. Existing shareholders received equity warrants in return for their support of the transaction.
The scheme won an overwhelming support from creditors that voted at the scheme meeting (99.5% by number and 98.9% by value of those creditors voting at the meeting) and was sanctioned by Mr. Justice Snowden on November 5, 2020. The scheme also received Chapter 15 recognition on November 6, 2020.
As a result of the financial restructuring, the KCA Group has reduced the debt outstanding under its principal third party financing arrangements from $1.9 billion to $505 million resulting in a pro forma net leverage of 1.4x, reduced its annual debt servicing costs by approximately $106 million and put in place a robust capital structure with a five year runway until the maturity of the reinstated bond debt.
The Weil team was led by Restructuring partners Neil Devaney and Mark Lawford (in London), and Andriana Georgallas (in New York); Private Equity partner Simon Lyell; Banking and Finance partners Nitin Konchady and Chris McLaughlin; and Tax partner Jenny Doak. They were assisted by Restructuring associates Harriet Fielding, Fergus Kent, Ilaria Olivero (in London), and Katherine Lewis (in New York); Private Equity associates Kirstin Fyffe and Dominika Javornicka; Banking and Finance counsel Mark Davis and Alexander Horstmann-Caines, and associates Stefan Monaghan and Conor Campbell; Tax associate Stuart Pibworth and Competition counsel Neil Rigby and associate Chris Thomas.