Pacific Drilling: Closing of $1Bln Aggregate Principal Amount Senior Secured Notes

Pacific Drilling

Pacific Drilling announced the closing of its previously announced private offering of $1.0 billion aggregate principal amount of senior secured notes, consisting of $750 million aggregate principal amount of 8.375% First Lien Notes due 2023 (the “first lien notes”) and $250 million aggregate principal amount of 11.000% / 12.000% Second Lien PIK Notes due 2024 (the “second lien PIK notes” and, together with the first lien notes, the “notes”). The net proceeds of the offerings have been funded into separate escrow accounts (the “Escrow Accounts”) pending Pacific Drilling’s emergence from bankruptcy.

Each series of notes was issued by a separate special purpose wholly owned subsidiary (together, the “Escrow Issuers”) of Pacific Drilling in connection with the restructuring of Pacific Drilling as part of the Joint Plan of Reorganization initially filed with the U.S. Bankruptcy Court for the Southern District of New York on July 31, 2018 and subsequently amended (as amended, the “Plan”). If the Plan is confirmed and certain other conditions are satisfied on or before December 22, 2018 (the date on which such conditions are satisfied, the “Escrow Release Date”), the Escrow Issuers will merge with and into Pacific Drilling, and Pacific Drilling will become the obligor under the notes. On the Escrow Release Date, the notes will be jointly and severally and fully and unconditionally guaranteed on a senior secured basis by each of Pacific Drilling’s restricted subsidiaries (subject to certain exceptions) and the first lien notes will be secured on a first-priority basis, and the second lien PIK notes on a second-priority basis, by substantially all of Pacific Drilling’s assets (subject to certain exceptions). Prior to the Escrow Release Date, each series of notes will be general obligations of the applicable Escrow Issuer, secured only by a lien on the applicable Escrow Account. On the Escrow Release Date, the net proceeds from the offerings will be released from the Escrow Accounts to fund a portion of the payments to creditors provided for under the Plan.

Pacific Drilling CEO Paul Reese commented, “The successful execution of these financial transactions marks an important step in our Company’s restructuring under the Plan. We believe the Plan will strengthen our Company’s balance sheet by reducing its leverage and delivering a substantial amount of new capital. Upon consummation of the Plan, we expect our Company’s cash position will be significantly enhanced, and we will be in a much stronger financial position to take advantage of our dedicated, high-specification deepwater drillship fleet in anticipation of an improving market for offshore drilling services.”

The notes and related guarantees were offered and sold in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and were offered and sold only to qualified institutional buyers under Rule 144A of the Securities Act, and to non-U.S. persons in transactions outside the United States under Regulation S of the Securities Act. The notes have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Credit Suisse Securities (USA) LLC acted as sole book-running manager and initial purchaser for the notes.

Legal counsel for Pacific Drilling was Jones Walker LLP, and legal counsel for Credit Suisse Securities (USA) LLC was Cravath, Swaine & Moore LLP.

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