Investing.com -- Noble Corporation PLC (N:NE) announced on Friday that it reached an agreement in principle with Paragon Offshore, PLC, to settle all claims related to an August, 2014 spin-off.
Paragon, an offshore drilling rig operator, also agreed to terms with creditors in bankruptcy proceedings on Friday to restructure $2.7 billion in debt, the company announced. The settlement will help Paragon eliminate more than $1.1 billion in debt and reduce its annual cash interest payments by nearly $60 million. As part of the settlement, Paragon has agreed to file for Chapter 11 Bankruptcy in Wilmington, Delaware, by Sunday, according to court filings.
Under the agreement, Noble will provide tax bonding and assume all of Paragon's tax liabilities in Mexico. In addition, Noble will assume control of all of Paragon's income, value-added and custom tax audits and assessments dating back to 2010.
"We are extremely pleased to have reached agreements that will allow Paragon to significantly reduce its debt while preserving majority ownership for existing equity holders," Paragon CEO Randall Stilley said in a statement.
Paragon also announced on Friday that it has entered into a Plan Support Agreement with 77% of its unsecured bondholders, as well as 89% of revolver lenders, under which each group will receive cash for reducing the principal of their debt. Holders of the unsecured notes will receive $345 million in cash, Paragon said in a statement.
"Paragon will continue to operate as usual, paying our employees and vendors in the normal course while providing the same high level of service to our customers," Stilley added.
At the time of its spin-off from Noble two summers ago, Paragon drilling fleet consisted of 34 jackups, five drillships and three semi-submersible floaters. Paragon currently owns approximately 40 rigs, which it operates primarily in offshore waters outside of Mexico.
Shares in Noble gained 0.39 or 5.60% to close at 7.36 on Friday.