History
Seadrill Partners grew by buying rigs from parent Seadrill Limited with new units, then by late 2020 was negotiating a debt recapitalization with unitholders' fate unresolved.
2013-2014: Buying rigs from the parent
Seadrill Partners was formed by Seadrill Limited to own, operate and acquire offshore rigs, and listed in October 2012. In May 2013 it agreed to buy the companies owning the tender rig T-15 from Seadrill Limited for $210 million, less about $100 million of debt. About $110 million was funded by vendor financing from Seadrill. The rig was contracted to Chevron in Thailand for five years at $115,500 a day.
The pattern for the next year was to pay for each purchase with new units, which diluted existing holders. In December 2013 it sold 12,880,000 units at $29.50 to fund its share of the West Leo and West Sirius purchases, and Seadrill Limited bought a further 3,394,916 units. In March 2014 it agreed to buy the drillship West Auriga, with a share of the net price of $355.4 million. It sold 11,960,000 units at $30.60, with Seadrill Limited buying another 1,633,987. West Auriga was contracted to BP in the US Gulf of Mexico at $565,000 a day until October 2020.
In June 2014 it sold 6,100,000 units at $31.41, about $200 million gross, this time for general purposes rather than a named rig. Seadrill Limited bought 3,183,700 units privately. In November 2014 it agreed to buy the drillship West Vela, with a net share of $238 million. BP had it under contract until November 2020, though payments to Seadrill brought the effective rate to $525,000 a day. The third-quarter 2014 distribution had been raised to $0.5525 per unit.
2015-2018: West Polaris and a covenant waiver
In June 2015, Seadrill Operating LP, then 58% owned by the company, agreed to buy the drillship West Polaris for $204 million in cash plus $336 million of debt on the rig. Part of the price was funded by a $50 million sellers' credit due 2021 at 6.5%. The rig worked for ExxonMobil in Angola at $653,000 a day until March 2018, but any rate above $450,000 went to Seadrill. Unlike earlier deals, the Board did not intend to raise distributions because of it. The record is then quiet until 2018.
In February 2018 the company agreed with a majority of its Term Loan B lenders to waive its leverage covenant (a limit on borrowing relative to earnings) until the loan matured in February 2021. In return it accepted a margin 3% higher, a prepayment tied to ongoing litigation, the addition of West Vencedor to the collateral, and limits on moving cash outside the collateral group.
2019-2020: Delisting and restructuring
In September 2019 the NYSE suspended trading in the units and began delisting proceedings because of low market capitalization. The units moved to over-the-counter trading as SDLPF, and the company said it would keep filing with the SEC and intended to appeal. Reported shares on issue fell from 75,278,250 at the end of 2018 to 7,527,830 at the end of 2019. The record does not explain this change.
In July 2020 an agreement with lenders holding over 70% of the Term Loan B was reached and closed in August. A $63.7 million super senior loan maturing February 2021 replaced the cash interest due on 30 June. It carried interest added to the balance at Libor plus 1000 basis points and a 10% exit premium. About $230 million of secured bank debt was retired. The company had to complete a recapitalization acceptable to the required lenders by 15 December 2020.
On 25 November 2020, the company said it had chosen not to make a swap payment (an interest-rate hedge) due on 23 November. Lenders holding a majority of the Term Loan B agreed to forbear from enforcing defaults or accelerating the hedging liabilities through the loan's maturity, unless a separate default occurred. At that date the recapitalization deadline, the February 2021 maturities and the unitholders' fate all remained unresolved.
Written from the 14 story beats below (2013 to 25 Nov 2020), which come from the company's own announcements and filings.