It’s in the secured and primary debt holders Interest to approve the restructuring because they get paid in full.
It’s in the class 3&4 groups interest to approve so they get a chance of a return. But to actually see that return they need to support the post-restructuring financing as well because they need the new company to survive long enough to sell their new stock to the new suckers who will buy it.
What a horrible trainwreck this industry has become and that no company saw this as a possibility? Not one to just take a safe conservative responsible approach to their growth?
Truly heinous in every way!
o[quote=“c.captain, post:68, topic:57310”]
What a horrible trainwreck this industry has become and that no company saw this as a possibility? Not one to just take a safe conservative responsible approach to their growth?
[/quote]
Of course they saw the possibility as they had been thru it before. Your problem is you are looking at the oil drilling business from the standpoint of an employee or stockholder. The business has since its inception back during the wildcat days in Pennsylvania and Texas existed to enrich the executives of the companies. They promise riches to early investors and pay enough in the beginning to make it look like a sure thing. They pay themselves exorbitant salaries and even pay their workers good for a time. When it all comes crashing down they reorg thru Chapter 11. Pay the former CEO a hefty bonus when he resigns, which was written into his contract from the start, lay off the workers or cut their pay, give the stock holders nothing and the bond holders pennies. The bankers that sold the bonds are already rich. They then rinse and repeat. It is a great business model that has been going on for over 100 years in the oil ‘bidness’.
I can understand if it was a startup company like Pacific Drilling having a very Cavalier attitude towards the investors but the Legacy companies like Transocean having the same attitude! It actually seemed for quite some time that they were being very conservative about their expanding by only building a few new ships but then I guess they saw that in order to keep market share they needed to jump on that same bandwagon. They already had a big fleet of rigs that were 100% contracted and mostly all paid off. What more can you ask for than that? Then there was their buying Songa and then Ocean Rig as they did in when they were stacking or scrapping their own equipment which to me seemed pure idiocy especially as the deals were not all srock but involved TO spending a whole lotta cash. Bechya today they wished they hadn’t done that?
I wonder if the Rocket Scientists at the old Ensco with fancy titles who convinced them to buy Rowan and Atwood (with few contracts) are still employed??
To get an insight on the CEO get rich quick mind set look at the history of Paul Bragg. Began with Arthur Anderson, accounting firm of Enron fame. Saw how things worked and became CFO/vice president of Ensco, then went back to the venture capital business, suddenly became CEO of Pride Drilling. As CEO of Pride he was ousted by the board. [He didn’t have time to pack the board of directors with his cronies.] Found more money and established Vantage Driling which went BK and Bragg was implicated by Brazil for money laundering and bribery in 2018.
Notice that his background is finance. Most drilling company officers major in finance and minor in the oil business. They all have one goal…make as much money for themselves as quickly as possible. When they start a new company the first thing they arrange is a prepackaged bankruptcy plan and golden parachute. None of these drilling companies are in the oil business they are in the money business. The hire people to do the drilling. They do a super job at PR, hide the profits offshore, fleece investors and make themselves personally a lot of money. If you want to invest in oil, invest in an oil company.
I am not disagreeing with the premise that the Deepwater drilling industry has become a get rich quick scheme for executives to fleece obviously blind investors, but why a long time legacy company that had been in a very strong position would make themselves vulnerable to a major industry downturn? I don’t care about Pacific as their share of the market is so small that they are really quite meaningless, but Transocean who always has been the industry leader would both take on newbuilding projects and buy out other companies even after the market began to turn down? Granted they have not yet filed for reorganization themselves and possibly might be able to avoid that although it appears very unlikely. Still that a board of directors would approve the spending that took place after 2014 to me seems unexplainable? Granted a CEO who does not have an operational background might want to take risks but the board should have been a check on him? At least that’s the way you want to believe a corporation like Transocean would work, but that does not appear to be the case at all.
The BOD get on the board with the CEO’s approval, in most cases. Transocean was originally a Norwegian company and is hardly a legacy company in the offshore drilling business. They originally hunted whales. Until Transocean acquired Sedco Forex in 1999 they were not well known. When they acquired Falcon they started to make a name for themselves but it was not until they merged with Global they became a big deal. Keep in mind they got bigger by merging with other companies not due to their expertise in drilling oil wells but their expertise in financing mergers. Their expertise in drilling was evidenced in the Deepwater Horizon episode and other episodes prior to that. They were prepared for the Horizon matter and to this day refuse to accept any blame. Their rig managers, like most drilling companies, first order of business is to “maximize the companies assets”, which leads to all sorts problems. But the rig managers are well paid to cut corners. The Deepwater Horizon’s former manager cut so many preventative maintenance measures it was mentioned in the final report of the disaster yet he by then was working in an executive job at another drilling company.
Transocean, the former Norwegian company headquartered in Switzerland but a US company in everyone’s mind is a great example of the offshore oil business.
here is the chart or Transocean’s share price over a 10year period.
It shows a generally steady climb up from $10+/- per share to $160.54 per share on May 16, 2008 then a steep drop during the financial crisis of 2009 but then some level of stability through to June 27th, 2014 when the share price was $44.53 which was its last high before the rout in crude prices hit the industry. Since then the shares have lost 98% of their value and now are roughly $1.
In 2015 the board of directors basically installed a kid as the master of the ship when they appointed Jeremy Thigpen as the CEO. He was only 41 years old when they did and I am sorry but as the industry leader with greatest marketshare, could they not recruit someone with more experience? So I must ask, how is it that a board of directors be so utterly irresponsible in their fiduciary duties? Transocean was and still is a giant in the industry but the debt they have taken on SINCE the downturn in 2014 is completely astounding imo? It appears every move as one of tremendous risk based on projections of some big upturn in the drilling market with zero hedge or protection against that no happening? I leaves me asking WHY, WHY, WHY??? Being appointed to the BoD means they themselves have an interest that the share values go up and not down but they approve moves that almost insures that is what would happen and it certainly has in a huge way. It is simply corporate suicide!
Thigpen came from NOV. He at least knows the business. He was previously chief financial officer of NOV. So, he knows how to find money. Finding oil or employing ships to do so is secondary. Thigpen’s salary, not including bonuses, stock options, golden parachute etc is over $9,000,000/year. If it all comes crashing down he will be just fine. 
I am sure he works hard, maybe 80 hours a week which means he only make a little over $1500/hour.
To be fair, Transocean always had a policy of not building on spec. They only ever built ships in the last 10+ years with contracts in place, until Carl Ichan’s brief crusade in 2013. The Altas and Titan that have ballooned in cost are the two rigs that Ichan pushed the company to build on spec cheaply back then at an original planned cost of around only $500M each, delayed and change-ordered since to their current high-spec multi-billion dollar lead weights.
The board was firmly against it, and the Chairman resigned shortly thereafter. Ichan bought enough shares to get his guys on the board, started a proxy battle that the board eventually relented, ordered those two rigs, and paid out over $1billion in dividends. Then Ichan sold his stock, washed his hands of RIG and walked away, precipitating a financial hole that only grew during the subsequent downturns. I firmly believe Ichan’s raiding had a large impact on an otherwise relatively sound company.
Er, there was also the Icahn raid in 2013:
And he was out by 2016:
I happened to chat with the VC that supported our company around that time and he said nobody could figure out what Icahn was up to in that deal.
Cheers,
Earl
so what was Ichan going to get from Transocean ordering those two ships from Sembawang when they did? Did he have some huge stake in SembCorp or something? Anyway, it does appear that whatever he tried to do influencing the BoD at Transocean, it backfired miserably because he took a bloody nasty haircut when he finally bailed out.
Oh, I am quite sure he hedged enough to protect himself from a big haircut. Short the stock while making noise that drives the price down, cash in and move on.
The SEC would love that case.
The SEC doesn’t mess with people like Ichan. They have neither the will nor the money.
Ichan has been investigated a few times by the SEC but he has better lawyers than they do. He hires former attorneys from the SEC.
Shorting shares should be banned outright! Who the FUCK came up with it in the first place?
That is one reason I have never bought a single share in my life (I have some investments in conservative mutual funds tho) and that the value of stock is driven by greed and fear as opposed to basic financial fundimentals. Once upon a time the market was a place where investors bought with the longterm in mind but shortterm or worse daytraders ruined it. I am not saying I didn’t missout on being wealthy today if I had traded. I live right in the middle of some tech giants like Amazon and Microsoft where if I had jumped in it the 80’s or 90’s I would have never needed to work one day ever again but so it goes. While I never made money in the markets, I have never lost any either.
They hit Elan Musk for near $50 Million fine and made him give up a chairman position to settle a case not long ago. The SEC will mess with anybody if you give them a reason to. Shorting your own shares while purporting info to drive down the stock is low hanging fruit for the SEC. I don’t buy that Icahn would risk the Martha Stewart version of jail time over losing “pennies” (at least to him).
I don’t think he (or anyone) anticipated the sudden drop starting in 2014. He bought over 20 million shares and pushed for a $3+ dollar dividend for an easy $60+ million payout. But then the share price plummeted as a result of the downturn. No matter what he definitely took some losses as he started buying in at $51/share and sold at just over $9/share in 2016. His filing said he sold to realize the capital loss for tax purposes. He could have recovered covered some of that with options hedging, and that would be legal as long as it wasn’t based on material non-public information. Pretty sure it was public knowledge things were falling off a cliff by late 2015.
Pushing for the spec rigs was likely because every other drilling company was doing it and to not do so seemed too conservative to him. I recall a dinner I went to around the time where Transocean’s then COO talked to a group of us about going to Ichan’s office. The COO was himself an imposing prick, and he said he was quite intimidated by Ichan.
I’m not familiar with any cases where an activist investor’s involvement in a company benefited anyone but themselves. It is probably why some major corporations have remedies in their governing documents to prevent individual shareholders from accumulating a controlling interest.
Then I must ask when DEEPWATER TITAN and ATLAS were ordered? Before the turn south in mid 2014 or after that? I thought it was afterwards? If it was from before it is almost 2021 and they are only now being finished?
