The ultimate fate of Transocean (RIG) shareholders may be determined in the next two months. That determination may have little to do with the economy or supply and demand in the off-shore drilling market. Instead, it will depend on legal analysis of a few indenture provisions.

Exchange Transactions

This is the situation Transocean finds itself in after entering into exchange transactions to reduce its outstanding debt amount and extend its debt maturities in an effort to stave off bankruptcy. In response to the exchange offer, Whitebox Advisors LLC and other owners of Transocean’s so-called “priority guarantee notes,” which are structurally senior to the company’s other unsecured notes, have sued Transocean to challenge the consummation of the exchange offer, arguing that the exchange offer, and the reorganization necessary for it, constitute a default under the indentures governing the priority guarantee notes.

Transocean has requested that the court hear its motion for summary judgment prior to December 1, 2020, which is the date that the cure period for the alleged default would expire. The challenging funds own more than 25% of one of the series of notes, the threshold for accelerating upon an Event of Default. These funds have delivered Transocean a notice that would automatically accelerate if the alleged default is not cured by December 1st, which is the end of the cure period. As a practical matter, Transocean cannot cure the alleged default as that would require undoing the exchange transaction. As such, Transocean’s only hope of avoiding bankruptcy at this stage is either (i) to win summary judgment from the court denying Whitebox’s claim that the transaction constituted a default or (ii) settle with the funds, in each case prior to December 1st.

The Alleged Default

The actual claim of default is quite interesting. Whitebox

a man wearing a suit and tie: Ed Bastian

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Ed Bastian

The airline hasn’t had the massive layoffs of the other major airlines in part because it gave employees a choice.


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It’s a rough time to be an airline.

Look no further than the decisions by United and American to impose massive layoffs and furloughs that began on October 1. That was the date airlines had agreed to when they received assistance from the U.S. government. Between them, those two companies say as many as 35,000 employees may lose their jobs, at least in the short term.

While the airline industry has pushed for a second round of aid to preserve jobs through next March, it’s unclear whether that will happen. The President tweeted that he believes Congress should provide $25 billion for airlines despite previously indicating that there would be no further pandemic-related assistance package until after the election.

Of all the businesses affected by the pandemic, I think it’s fair to say that airlines have faced some of the greatest challenges. Not only are people simply not traveling as much (or at all), but when they do, airlines face the enormous responsibility of keeping them safe.

That combination of decreased demand and increased safety expenses makes it very hard for airlines to make money. As the entire industry has canceled flights and reduced overall capacity, it may seem logical that the quickest way to reduce expenses is to furlough employees.

Delta, however, is taking a different approach. It said in September that it will avoid furloughing flight attendants, and has delayed any pilot reductions until at least November 1. That is largely the result of the company’s