Seadrill Ltd (NYSE:SDRL) stock took a dive on Tuesday following another bankruptcy warning from the offshore drilling company.
Seadrill Ltd says that it is continuing to work on its restructuring plan. However, it notes that this plan may result in the company filing for Chapter 11 bankruptcy protection.
Seadrill Ltd notes that the plan will “likely involve schemes of arrangement or chapter 11 proceedings.” It also says that it is working to prepare for such cases. SDRL is planning to continue business operations, even if it does have to file for Chapter 11 bankruptcy protection.
Seadrill Ltd says that its restructuring plan will require a “substantial impairment or conversion of our bonds”. It also points out that the plan will likely result in “impairment, losses or substantial dilution for other stakeholders”.
The news of impairment, losses or dilution for stakeholders is bad for investors. The company is warning its stockholders that they will likely receive ” minimal recovery” for their existing shares.
Seadrill Ltd bankruptcy warning comes in the same announcement that provides an update on its agreements with its banking group. This includes extensions of major dates for its restructuring plans.
These extensions means that the company now has until July 31, 2017 to start its restructuring plan. It also won’t see its related covenant amendments and waivers expire until Sept. 30, 2017. The extension also includes maturity dates for three of its facilities.
Seadrill Ltd first warned investors of a possible bankruptcy during its earnings report for the fourth quarter of 2016. The announcement came in February and SDRL shares dropped by 15% in response to the news.
SDRL stock was down 54% as of Tuesday afternoon, and is down 78%year-to-date.