In business restructuring and chapter 11 cases, it’s not all that unusual at the outset for professionals to exclaim at some juncture, “You want me to do what…?” That was the question prior to the initiation of the Laforta-Gestao e Investimentos, Sociedade Unipessol, Lda., et al. (“debtors” or “Laforta”) engagement for the eventual control and sale of the La Muralla IV, a 10-year-old, sixth-generation, ultra-deepwater semi-submersible drilling rig (“La Muralla”).
Laforta was just your typical, average operating investment that was held by a private limited liability company organized under the laws of Portugal that was a wholly owned subsidiary of Offshore Drilling Holding S.A., which was a private limited liability company incorporated under the laws of the Grand Duchy of Luxembourg. You see this every day — right?
The debtors were involved in the deepwater drilling industry in Mexico, but their contract had not been renewed and they had no revenue stream. Laforta had more than a billion dollars in secured debt and an uncertain path, to say the least, of realizing value from a sole asset. Oh, and La Muralla required material (read: tens of millions of dollars) worth of investment, maintenance, upgrades and improvements to return it to an active operating state.
MACCO Restructuring Group, LLC was engaged as financial advisor, together with its managing director and maritime expert, David Weinhoffer, who was named CRO. At the time, La Muralla sat approximately four nautical miles off coast of Tampico, Mexico, without an anchor, running low on fuel, no drilling contract, in payment arrears with everyone including the crew, leaderless, and in trouble with the Mexican authorities. The debtor, its parent and certain of its noteholders had been working to find a solution for quite some time, without success.
Under this set of circumstances, Laforta filed for chapter 11 relief in the Southern District of Texas on June 16, 2022 (Bankr. S.D. Tex., Case No. 22-90126-DRJ). The filing allowed Laforta to access essential financing to address its numerous operational issues while pursuing a viable path to realizeing value for the benefit of its creditors that would not be achievable outside of bankruptcy. Under Weinhoffer’s leadership, certain members of the noteholder group agreed to provide post-petition, backstopped financing of $33 million of new money to fund necessary operational expenses, as well as the chapter 11 and sales process expenses.
Once Weinhoffer secured power of attorney in Mexico to act on behalf of the operator, Grupo R, the debtor’s project team quickly moved to take control of the drilling rig. La Muralla was outfitted with proper anchoring, an anti-piracy plan was put into place (you don’t see that every day!), and shore-side protestors were kept at bay as all outstanding claims and issues with local customs were reconciled. This notably included working with all Mexican, Panamanian and Bahamian regulatory agencies to make arrangements to relocate La Muralla to Freeport, Bahamas — a 1,300-mile ocean transit in the midst of hurricane season — and also included a complete comprehensive engineering analysis of the final destination’s dockage in compliance with all local legal, environmental and logistical requirements for such a large drilling rig.
To achieve a confirmable plan, the debtor had to (1) take overall control of the La Muralla IV, (2) reconcile past-due wage claims and tariffs due from the previous years, (3) ready the drilling rig to move 1,300 miles and (4) relocate the vessel to a purpose-designed mooring in Freeport, Bahamas, for subsequent sale. This was accomplished in three weeks after taking control of the La Muralla.
The equally complex international auction process was managed by Weinhoffer, and once dockside in the Bahamas (no small feat), the debtor contracted an international specialized engineering firm to perform a comprehensive survey to establish expectations in time and cost for bringing the rig back into operational and regulatory compliance for worldwide drilling operations to better establish the asset value. Bidders had access to a data room with comprehensive engineering and technical documentation, who sent teams to the Bahamas to perform on-site inspections. During the inspection process, the rig weathered two hurricanes without any damage.
The winning bid generated a total sale price of $60,353,651.31, and the La Muralla was transferred to its new owner on Nov. 30, 2022. A structured dismissal was approved on Aug. 31, 2023. The structured dismissal, along with the agreement of the senior lenders to accept the net proceeds from the sale, was confirmed on Aug. 31, 2023, and became effective in mid-October 2023. Without the successful sale, the debtors would not have been able to confirm a dismissal providing for a meaningful recovery to the secured lenders.
The Asset Sales Committee received many nominations for its Asset Sale of the Year Award and selected a winner based on the following criteria (dollar amount not being a factor):
- Completion of a distressed sale (“Sale”) that was strategic and provided stakeholders with value;
- A display of excellence across the full spectrum of the Sale process, from the initial targeting through pursuit, structuring and financing, to completion of a transaction;
- A Sale reflecting a prominent level of professional expertise in the design of the transaction, and/or creativity and skill in completing the transaction; and/or
- A Sale of strategic or legal significance and impact, including overcoming challenges to completion, innovative financial engineering, and/or motivating agreement across multiple stakeholders.
The Laforta case, the sale of La Muralla, and the complexities and skill exercised by Weinhoffer, MACCO and all the professionals in this case met or exceeded the committee’s criteria.
The Laforta team included not only MACCO and Weinhoffer, but also debtors’ counsel, Jackson Walker LLP (Rebecca Blake Chaikin, Matthew D. Cavenaugh, Elizabeth C. Freeman, Genevieve M. Graham, Veronica A. Polnick and Javier Gonzales), special corporate counsel Clifford Chance (Jennifer DeMarco and Sarah Campbell), project manager ABW Vessel Management Ltd. (Ole’ Aagvaard), counsel to the lender Milbank (Mark Shinderman, Casey T. Fleck and Brian Kinney) and Pachulski Stang Ziehl & Jones LLP (Michael Warner and Benjamin Wallen), advisor to the lender Maritime Finance Ltd. (Kristan Bodden), and financial advisor to the lender Rothschild & Co. (Norberto Montenegro, Daniel Nicolaievsky, Ismael Ortiz, Miguel De la Garza, Yoshua Pelman and Jonatan Siano).