| Item 1.01. | Entry into a Material Definitive Agreement |
Indenture
On September 21, 2023, Diamond Foreign Asset Company (the “Cayman Issuer”), a wholly owned subsidiary of Diamond Offshore Drilling, Inc. (the “Company”), and Diamond Finance, LLC, a wholly owned subsidiary of the Company (together with the Cayman Issuer, the “Issuers”), issued $550 million aggregate principal amount of 8.500% Senior Secured Second Lien Notes due 2030 (the “Notes”) in a private placement (the “Offering”) conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Notes were issued at par for net proceeds of approximately $540 million, after deducting the initial purchasers’ discount and estimated offering expenses. The Company is using a portion of the net proceeds from the Offering to fully repay and terminate its term loan credit facility, redeem in full its Senior Secured First Lien PIK Toggle Notes due 2027 and repay all of the borrowings outstanding under its senior secured credit agreement (the “Revolving Credit Facility”), and it intends to use the remaining net proceeds for general corporate purposes.
The Notes are governed by an Indenture, dated as of September 21, 2023 (the “Indenture”), entered into among the Issuers, the Company and certain subsidiaries of the Company named therein (the “Guarantors”) and HSBC Bank USA, National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”). The Notes will mature on October 1, 2030. Interest on the Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2024. The Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors and by each of the Company’s existing restricted subsidiaries (other than the Issuers) that is a borrower under or a guarantor of the Revolving Credit Facility and certain future subsidiaries.
The Notes and the related guarantees are (or will be, subject to post-closing timeframes permitted for the perfection of certain liens on the collateral) secured on a second-priority basis, subject to certain permitted liens and encumbrances described in the Indenture and the Security Documents (as defined in the Indenture), by the assets of the Company, the Issuers and the Guarantors that secure their respective obligations under the Revolving Credit Facility on a first-priority basis.
On or after October 1, 2026, the Issuers may, at their option, redeem all or any portion of the Notes from time to time upon not less than 10 days nor more than 60 days prior notice, at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The following prices are for Notes redeemed during the 12-month period commencing on October 1 of the years set forth below, and are expressed as percentages of principal amount:
| | | | |
Redemption Year | | Price | |
2026 | | | 104.250 | % |
2027 | | | 102.125 | % |
2028 and thereafter | | | 100.000 | % |
At any time and from time to time, prior to October 1, 2026, the Issuers may, on any one or more occasions, redeem up to 35% of the aggregate principal amount of the Notes issued under the Indenture (including any additional Notes, if any) with an amount equal to or less than the net cash proceeds of one or more equity offerings, at a redemption price equal to 108.500% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date provided, however, that immediately after giving effect to any such redemption, at least 65% of the original aggregate principal amount of Notes issued on the issue date (excluding Notes held by the Company or its subsidiaries) remains outstanding.
In addition, at any time prior to October 1, 2026, the Issuers may redeem up to 10% of the original aggregate principal amount of the Notes issued under the Indenture (including additional Notes, if any) during any twelve-month period at a redemption price equal to 103.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
At any time prior to October 1, 2026, the Issuers may redeem some or all of the Notes at a price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium.
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