Orrick Navigates Ocean Rig Through Groundbreaking International Debt Restructuring


Orrick acted as lead counsel to Cayman Islands-based offshore drilling contractor Ocean Rig UDW (the “Company” or “Ocean Rig”) in its comprehensive financial restructuring, a unique transaction involving billions of dollars in restructured debt and enforcement by a U.S. Bankruptcy Court of schemes of arrangement sanctioned by the Grand Court of the Cayman Islands.

Prompted by the severe and prolonged oil and gas industry downturn, Ocean Rig implemented a recapitalization and deleveraging transaction pursuant to four interrelated schemes of arrangement in the Cayman Islands. The Company and its Marshall Islands registered subsidiaries, Drill Rigs Holdings Inc., Drillships Financing Holding Inc. and Drillships Ocean Ventures Inc. (collectively, the “Scheme Companies”) exchanged approximately $3.7 billion principal amount of debt for new equity, $450 million in new secured debt and approximately $288 million in cash.

The scheme for each of the three Marshall Islands subsidiaries was approved by 100% of the participating creditors, and the Company’s scheme was approved by in excess of 98% of the participating creditors, with only five affiliated creditors voting against the Company’s scheme.

Orrick advised Ocean Rig on all aspects of the restructuring, including the terms of the schemes of arrangement approved by the Cayman court, the prosecution of ancillary proceedings in the United States pursuant to Chapter 15 of the U.S. Bankruptcy Code (the “Chapter 15 Proceedings”), in securing a conditional exception from NASDAQ’s initial delisting decision following the commencement of the restructuring, and in matters relating to the issuance of new equity to creditors.

The Scheme Companies entered into a Restructuring Support Agreement (RSA) with a core creditor group on March 23, 2017 which allowed them to pursue provisional liquidation and scheme of arrangement proceedings under the supervision of joint provisional liquidators (JPLs) appointed by the Cayman court (the “Cayman Proceedings”). To protect against the threat of hostile action in the U.S. by dissenting creditors, Orrick commenced ancillary proceedings in the Southern District of New York and obtained injunctive relief precluding creditors from proceeding against the Scheme Companies in the United States during the pendency of the Cayman Proceedings. The schemes of arrangement were sanctioned by the Cayman Court on September 15, 2017, and on September 20, 2017, the United States Bankruptcy Court issued an order granting comity and giving full force and effect to the schemes of arrangement in the U.S.

The restructuring was unusually swift for a transaction of this magnitude given the complexity of the company’s capital structure, the cross border nature of the Ocean Rig group and the need to deal with hostile hold-out creditor actions in both the Cayman Proceedings and the Chapter 15 Proceedings. The wider restructuring community has already taken note of the transaction due to a number of novel features and precedent setting legal determinations:

  • a precedent setting establishment of a company’s “center of main interests” (“CoMI”) to gain access to a value maximizing restructuring regime;

  • clarification of existing case law to confirm that Cayman Islands exempted companies and registered foreign companies may establish their CoMI in the Cayman Islands;  

  • the first hotly contested Cayman Islands scheme proceedings;

  • the strategic use of provisional relief in a chapter 15 proceeding to preclude dissenting creditors from commencing competing insolvency proceedings intended to interfere with a value maximizing transaction agreed by all other creditors affected by the restructuring;

  • the first use of a litigation trust in a Cayman Islands scheme of arrangement to preserve potential causes of action for the benefit of scheme creditors; and

  • the use of a novel court-to-court protocol between the Cayman Islands and New York courts.

The case will clarify case law in Cayman and other Commonwealth jurisdictions, such as Australia and Hong Kong, and provide guidance on issues of class composition and fairness. The case has already been recognized as setting the “gold standard” for steps to be taken in order to establish a company’s CoMI, and for establishing a good faith basis for doing so.

Ocean Rig, listed on NASDAQ under the symbol “ORIG,” completed its restructuring within the deadline set by NASDAQ and retained its listing on the NASDAQ Global Select Market.

The Orrick team advising Ocean Rig was led by Bill Haft and included lawyers in New York and London, including Evan Hollander, Stephen Phillips, Scott Morrison, Raniero D’Aversa, Doug Mintz, Peter Rooney, Stephen Ashley, Gillian Smith, Mitch Pahl, Ayanna Lewis-Gruss, Courtney Mitchell, Jack Mead, Monica Perrigino, Ken Marx, Peter Amend, Debra Felder, Siobhan Sheridan, Amy Roper, David Litterine-Kaufman, Danny Rubens, Emmanuel Fua, Jason Ervin, Daria Loshkareva, Peter Tringali and others.