Paco Cestero

Cleary Gottlieb counsel to bondholders in Ocyan bond offering

Cleary Gottlieb represented an ad hoc group of bondholders holding approximately 61% of bonds issued by subsidiaries of Ocyan (f/k/a Odebrecht Óleo e Gas), a Brazilian oil and gas company providing drilling services and maintenance of offshore drilling rigs, in the restructuring of approximately US$2.7 billion of indebtedness.

The closing of the restructuring was consummated on June 7, 2023 and follows confirmation of an extrajudicial reorganization (EJ) plan and proceeding in the Bankruptcy and Reorganization Court in Rio de Janeiro and the Chapter 15 recognition and enforcement in the United States.

As a result of the restructuring, Ocyan’s existing bonds are being exchanged for a combination of consideration consisting of cash, voting and non-voting equity in a new Luxembourg-domiciled holding company (DrillCo), to which Ocyan’s existing drilling business is being transferred to, and approximately US$300 million of 7.5% new senior secured notes due 2030 issued by DrillCo and secured by a first priority lien on substantially all assets of DrillCo and its subsidiaries.

Bondholders elected among various options of consideration under the EJ plan, including electing to contribute approximately US$197 million of new money (the “New Money”) to DrillCo in exchange for the New Notes and DrillCo equity in the form of voting shares and non-voting shares. Bondholders who elected not to receive non-voting equity directly are receiving approximately US$410 million principal amount of new unsecured convertible notes issued by a new Luxembourg-domiciled holding company, which purpose is to provide the same economic return of holding DrillCo non-voting equity. The convertible notes are exchangeable for non-voting equity of the new drilling company, at the option of a holder or mandatorily upon certain conditions.

DrillCo shares are being allocated at closing: 45% to bondholders who elected to contribute the New Money, 42.5% to bondholders who did not elect the cash-out option under the EJ plan, 6.5% to Ocyan, 1.5% to DrillCo management, and 4.5% to bondholders who committed to backstop the New Money.

The financial and organizational restructuring leaves the drilling business well positioned for future growth, with enhanced liquidity and operational flexibility to capture new opportunities and to participate in a potential consolidation of the industry. The new drilling company will be led by a new board of directors, and management will be comprised by former officers of Ocyan.

The Cleary corporate team was led by partner Paco Cestero (pictured), associates Thomas Lopez, José Andres de Saro, Ashley Miller, and Sofia Falzoni, international lawyers Tamiris Guimarães and João Guilherme Thiesi da Silva, and law clerk Daniel Oyolu. Partner Bill McRae and associates Kylie Barza and Karl Heiland advised on tax matters. Counsel Penelope Christophorou, senior attorney Victor Chiu, and associate Jonathan Griggs advised on collateral matters. Partners Luke Barefoot and Tom Kessler advised on U.S. bankruptcy matters. Partner Marcela Robledo and associate Lindsay Harris advised on intellectual property and technology matters. Partner Chase Kaniecki, senior attorney Jim Corsiglia, and associates Samuel Chang and Stephanie Gullo advised on compliance and sanctions matters. Partner Mike Albano, associate Katherine Baker, and law clerk Ariel Adler advised on executive compensation matters. Partner Francesca Odell advised on governance matters.