Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

Note 6— Debt

Senior Secured Revolving Credit Facility

On February 5, 2021, Noble Finance Company (“Finco”) and Noble International Finance Company (“NIFCO”), each indirect wholly-owned subsidiaries of Noble, entered into a senior secured revolving credit agreement (the “Revolving Credit Agreement”) providing for a $675 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) (the “Revolving Credit Facility”) and cancelled all debt that existed immediately prior to February 5, 2021. The Revolving Credit Facility was set to mature on July 31, 2025. Subject to the satisfaction of certain conditions, Finco could from time to time designate one or more of Finco’s other wholly owned subsidiaries as additional borrowers under the Revolving Credit Agreement (collectively with Finco and NIFCO, the “Borrowers”). As of March 31, 2023, we had no loans outstanding and $21.1 million of letters of credit issued under the Revolving Credit Facility.

All obligations of the Borrowers under the Revolving Credit Agreement, certain cash management obligations and certain swap obligations were unconditionally guaranteed, on a joint and several basis, by Finco and certain of its direct and indirect subsidiaries (collectively with the Borrowers, the “Credit Parties”), including a guarantee by each Borrower of the obligations of each other Borrower under the Revolving Credit Agreement. All such obligations, including the guarantees of the Revolving Credit Facility, were secured by senior priority liens on substantially all assets of, and the equity interests in, each Credit Party, subject to certain exceptions and limitations described in the Revolving Credit Agreement. None of Pacific Drilling Company LLC, Maersk Drilling or any of their respective current subsidiaries was a guarantor of the Revolving Credit Facility, and none of their assets secured the Revolving Credit Facility.

The loans outstanding under the Revolving Credit Facility bore interest at a rate per annum equal to the applicable margin plus, at Finco’s option, either: (i) the reserve-adjusted LIBOR or (ii) a base rate, determined as the greatest of (x) the prime loan rate as published in The Wall Street Journal, (y) the federal funds effective rate plus 1/2 of 1%, and (z) the reserve-adjusted one-month LIBOR plus 1%. The applicable margin was initially 4.75% per annum for LIBOR loans and 3.75% per annum for base rate loans and would be increased by 50 basis points after July 31, 2024, and could be increased by an additional 50 basis points under certain conditions described in the Revolving Credit Agreement.

The Borrowers were required to pay customary quarterly commitment fees and letter of credit and fronting fees.

Availability of credit (whether borrowings or letters of credit) under the Revolving Credit Agreement was subject to the satisfaction of certain conditions, including, after giving effect to any such credit and the application of the proceeds (if any) thereof, (i) the aggregate amount of Available Cash (as defined in the Revolving Credit Agreement) could not exceed $100.0 million, (ii) if the Consolidated First Lien Net Leverage Ratio (as defined in the Revolving Credit Agreement) would be greater than 5.50 to 1.00, then the aggregate principal amount outstanding under the Revolving Credit Facility could not exceed $610.0 million, and (iii) the Asset Coverage Ratio (as described below) must be at least 2.00 to 1.00.

Mandatory prepayments and, under certain circumstances, commitment reductions were required under the Revolving Credit Facility in connection with (i) certain asset sales, asset swaps and events of loss (subject to reinvestment rights if no event of default existed) and (ii) certain debt issuances. Available Cash in excess of $150.0 million was also required to be

applied periodically to prepay loans (without a commitment reduction). The loans under the Revolving Credit Facility could be voluntarily prepaid, and the commitments thereunder voluntarily terminated or reduced, by the Borrowers at any time without premium or penalty, other than customary breakage costs.

The Revolving Credit Agreement obligated Finco and its restricted subsidiaries to comply with the following financial maintenance covenants:

•as of the last day of each fiscal quarter, the ratio of Adjusted EBITDA to Cash Interest Expense (each as defined in the Revolving Credit Agreement) was not permitted to be less than (i) 2.00 to 1.00 for each four fiscal quarter period ending on or before June 30, 2024, and (ii) 2.25 to 1.00 for each four fiscal quarter period ending thereafter; and

•as of the last day of each fiscal quarter, the ratio of (i) Asset Coverage Aggregate Rig Value (as defined in the Revolving Credit Agreement) to (ii) the aggregate principal amount of loans and letters of credit outstanding under the Revolving Credit Facility (the “Asset Coverage Ratio”) was not permitted to be less than 2.00 to 1.00.

The Revolving Credit Facility contained affirmative and negative covenants, representations and warranties and events of default that the Company considered customary for facilities of this type.

Please see “Note 15— Subsequent Events” regarding certain refinancing transactions that occurred subsequent to March 31, 2023, including the amendment and restatement of the Revolving Credit Agreement.

Second Lien Notes

On February 5, 2021, pursuant to the Backstop Commitment Agreement, dated October 12, 2020, Noble Cayman and Finco consummated a rights offering (the “Rights Offering”) of senior secured second lien notes (the “Second Lien Notes”) and associated Noble Cayman Shares at an aggregate subscription price of $200.0 million.

An aggregate principal amount of $216.0 million of Second Lien Notes was issued in the Rights Offering, which included the aggregate subscription price of $200.0 million plus a backstop fee of $16.0 million which was paid in kind. The Second Lien Notes were set to mature on February 15, 2028. The Second Lien Notes were fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Revolving Credit Facility. None of Pacific Drilling Company LLC, Maersk Drilling or any of their respective current subsidiaries was a guarantor of the Second Lien Notes, and none of their assets secured the Second Lien Notes.

The Second Lien Notes and such guarantees were secured by senior priority liens on the assets subject to liens securing the Revolving Credit Facility, including the equity interests in Finco and each guarantor of the Second Lien Notes, all of the rigs owned by the Company as of February 5, 2021 or acquired by the Company thereafter, certain assets related thereto, and substantially all other assets of Finco and such guarantors, in each case, subject to certain exceptions and limitations.

Interest on the Second Lien Notes accrued, at Finco’s option, at a rate of: (i) 11% per annum, payable in cash; (ii) 13% per annum, with 50% of such interest to be payable in cash and 50% of such interest to be payable by issuing additional Second Lien Notes (“PIK Notes”); or (iii) 15% per annum, with the entirety of such interest to be payable by issuing PIK Notes. Finco paid interest semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 2021. The Company accrued interest at the rate of 11% per annum, as the most recent payment and the payment upon the full redemption of the Second Lien Notes were made in cash.

On or after February 15, 2024, Finco could redeem all or part of the Second Lien Notes at fixed redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Finco could also redeem the Second Lien Notes, in whole or in part, at any time and from time to time on or before February 14, 2024 at a redemption price equal to 106% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a “make-whole” premium. Notwithstanding the foregoing, if a Change of Control (as defined in the Second Lien Notes Indenture) occurred prior to (but not including) February 15, 2024, then, within 120 days of such Change of Control, Finco could elect to purchase all remaining outstanding Second Lien Notes at a redemption price equal to 106% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

The Second Lien Notes contained covenants and events of default that the Company considered customary for notes of this type.

Please see “Note 15— Subsequent Events” regarding certain refinancing transactions that occurred subsequent to March 31, 2023, including the full redemption of the Second Lien Notes.

DNB Credit Facility and New DNB Credit Facility

Upon closing the Business Combination with Maersk Drilling (the “Closing Date”), Noble guaranteed the Term and Revolving Facilities Agreement dated December 6, 2018, by and among Maersk Drilling, the rig owners and material intra-group charterers party thereto and DNB Bank ASA as agent (as amended from time to time, the “DNB Credit Facility”).

On November 22, 2022, Maersk Drilling, as the borrower, the Company, as parent guarantor, certain subsidiaries of Maersk Drilling as guarantors, and the lenders identified therein, with DNB Bank ASA, New York Branch acting as Agent entered into a new Term Facility Agreement (the “New DNB Credit Facility”). On December 22, 2022, the Utilization Date (as defined in the New DNB Credit Facility) occurred under the New DNB Credit Facility, at which time the loans outstanding under the DNB Credit Facility were repaid with the proceeds of the full $350.0 million available under the New DNB Credit Facility.

The term loan under the New DNB Credit Facility required quarterly amortization payments on March 15, June 15, September 15 and December 15 of $2.5 million per quarter in the first year, $7.5 million per quarter in the second year, $12.5 million per quarter in the third year, and a balloon payment payable on the termination of the New DNB Credit Facility in an amount equal to the remaining outstanding principal amount of the loan. The loan under the New DNB Credit Facility accrued interest at an initial rate of Term SOFR + 3.50% with quarterly step-ups commencing on the first anniversary of the Utilization Date of an additional (i) 0.15% per quarter during months 13 to 24 after the Utilization Date (with total Margin payable during the fourth quarter of that period being Term SOFR + 4.10%) and (ii) 0.25% per quarter during months 25 to 36 after the Utilization Date (with total Margin payable during the fourth quarter of that period being Term SOFR + 5.10%). The New DNB Credit Facility had the following financial covenants (each as defined in the New DNB Credit Facility): (i)) The Company’s liquidity could not at any time be less than $200.0 million; (ii) Maersk Drilling’s liquidity could not at any time be less than $50 million; (iii) Maersk Drilling’s leverage ratio could not at any time be greater than 4.75:1.00; and (iv) Maersk Drilling’s equity ratio could not at any time be less than 35%. The New DNB Credit Facility also contained affirmative and negative covenants, representations and warranties, and events of default that the Company considered customary for facilities of this type. The New DNB Credit Facility was set to mature in December 2025.

Please see “Note 15— Subsequent Events” regarding certain refinancing transactions that occurred subsequent to March 31, 2023, including the payoff of the New DNB Credit Facility.

DSF Credit Facility

The Company guaranteed the Term Loan Facility Agreement dated December 10, 2018 by and between Maersk Drilling and Danmarks Skibskredit A/S as lender, agent, and security agent (as amended from time to time, the “DSF Credit Facility”) in connection with the Business Combination with Maersk Drilling that closed on October 3, 2022. The DSF Credit Facility was repaid in full on February 23, 2023 using cash on hand.

Debt Open Market Repurchases

In August 2022, we purchased $1.6 million aggregate principal amount of our Second Lien Notes for approximately $1.8 million, plus accrued interest, as open market repurchases and recognized a loss of approximately $0.2 million. In the fourth quarter of 2022, we purchased $40.7 million aggregate principal amount of our Second Lien Notes for approximately $45.1 million, plus accrued interest, as open market repurchases and recognized a loss of approximately $4.4 million.

Fair Value of Debt

Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our debt instruments was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). The fair value of each of the Revolving Credit Facility, the New DNB Credit Facility and the DSF Credit Facility approximates its respective carrying amount as its interest rate is variable and reflective of market rates. All remaining fair value disclosures are presented in “Note 11— Fair Value of Financial Instruments.”

The following table presents the carrying value, net of unamortized debt issuance costs and discounts or premiums, and the estimated fair value of our total debt, not including the effect of unamortized debt issuance costs, respectively:

	March 31, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Senior secured notes:
11.000% Senior Notes due February 2028	$	173,696	$	188,761	$	173,695	$	192,353
Credit facility:
Senior Secured Revolving Credit Facility matures July 2025	—		—		—		—
Term Loans:	—		—		—		—
New DNB Credit Facility matures December 2025	346,958		347,500		349,360		350,000
DSF Credit Facility matures December 2023	—		—		149,715		149,715
Total debt	520,654		536,261		672,769		692,068
Less: Current maturities of long-term debt	15,000		—		159,715		—
Long-term debt	$	505,654	$	536,261	$	513,054	$	692,068