Paragon Offshore stalls interest payment

Paragon Offshore, a provider of jack-up offshore drilling rigs, has decided to defer an interest payment of approximately $15.4 million due today on its 6.75% senior unsecured notes maturing July 2022.

The driller, which recently got delisted from the New York Stock Exchange due to its shares under-performance said that, under the terms of the indenture governing the 2022 Notes, the company has a 30-day grace period after the interest payment date before an event of default occurs.

In a statement of Friday, Paragon said it believed it is in the best interests of all stakeholders, including equity holders, to use the grace period to continue to engage in discussions with its secured and unsecured debtholders related to alternatives to improve Paragon’s long-term capital structure.

There is no assurance that the discussions with Paragon’s debtholders will result in an agreement before the end of the grace period, the company said.

The driller which operates 34 jack-ups and six floaters can elect to make the interest payment at any time during the grace period. However, if Paragon decides not to make the interest payment by the end of the grace period, such failure would result in the rights of the requisite holders of certain of its indebtedness, including the 2022 Notes and revolving credit facility, to accelerate the repayment of the principal amounts due, which acceleration would result in a cross-default under Paragon’s term loan facility, the company explained.

Randall D. Stilley, President and Chief Executive Officer of Paragon, said, “Paragon has made the strategic choice to defer this interest payment as constructive dialogue with debtholders continues. We believe we are making progress in achieving our objective to improve the long-term capital structure of the company. Paragon’s substantial cash position at December 31, 2015, more than $750 million, provides us with flexibility as we negotiate.

“Furthermore, it allows us to continue to meet all of our obligations to suppliers, employees, and others as we deliver safe, reliable, and effective operations to our customers in the normal course of business.”

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