Long-Term Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Long-Term Debt

6. Long-Term Debt

At June 30, 2023 and December 31, 2022, the carrying value of our long-term debt (or Exit Debt), net of unamortized discount, premium and debt issuance costs, was comprised as follows (in thousands):

	June 30,		December 31,
	2023		2022
Borrowings under Exit RCF	$	182,478	$	177,478
Exit Term Loans		99,269		99,190
First Lien Notes		84,112		83,976
Total Exit Debt, net	$	365,859	$	360,644

The Exit Revolving Credit Agreement (as defined below) obligates Diamond Offshore Drilling, Inc., the borrower thereunder and their respective restricted subsidiaries to comply with certain financial maintenance covenants as specified in the Exit Revolving Credit Agreement. The Exit Revolving Credit Agreement and Exit Term Loan Credit Agreement (as defined below) and the indenture governing our 9.00%/11.00%/13.00% Senior Secured First Lien PIK Toggle Notes due 2027 (or First Lien Notes) contain negative covenants that limit, among other things, the ability of Diamond Offshore Drilling, Inc., the applicable borrower thereunder and their respective restricted subsidiaries to: (i) incur, assume or guarantee additional indebtedness; (ii) create, incur or assume liens; (iii) make investments; (iv) merge or consolidate with or into any other person or undergo certain other fundamental changes; (v) transfer or sell assets; (vi) pay dividends or distributions on capital stock or redeem or repurchase capital stock; (vii) enter into transactions with certain affiliates; (viii) repay, redeem or amend certain indebtedness; (ix) sell stock of its subsidiaries; or (x) enter into certain burdensome agreements. These negative covenants are subject to a number of important limitations and exceptions.

Additionally, these agreements contain other covenants, representations and warranties and events of default that are customary for financings of this type. At June 30, 2023, we were in compliance with all covenants under the Exit Revolving Credit Agreement and other Exit Debt.

Exit Revolving Credit Agreement

On April 23, 2021, we entered into a senior secured revolving credit agreement (or the Exit Revolving Credit Agreement), which provides for a $400.0 million senior secured revolving credit facility and also provided for certain lenders (or the LC Lenders) to issue up to $100.0 million of letters of credit thereunder (or the Exit RCF). As a result of the resignation of two LC Lenders since entering into the Exit Revolving Credit Agreement, the aggregate amount of the commitments of the LC Lenders to issue letters of credit under the Exit RCF was reduced from $100.0 million to $75.0 million effective September 30, 2022, and further reduced to $50.0 million effective March 23, 2023.

On June 13, 2023, Wells Fargo Bank, National Association (or Wells Fargo) gave notice of its resignation (or the Notice of Resignation) as Collateral Agent, Administrative Agent and Issuing Lender (as such terms are defined in the Exit Revolving Credit Agreement) under the Exit Revolving Credit Agreement. Wells Fargo continues to have all of the rights and obligations of an Issuing Lender under the Exit RCF with respect to letters of credit issued by it prior to its resignation but, after the effective date of its resignation, is not required to issue additional letters of credit or extend, renew or increase the outstanding letters of credit. Wells Fargo had previously committed to issue up to $25.0 million in letters of credit under the Exit RCF of which $21.3 million had been utilized as of June 30, 2023. The LC Lenders, including Wells Fargo, have committed to issue letters of credit under the Exit RCF up to $50.0 million in total. As a result of the resignation of Wells Fargo and after the resignation becomes effective, the aggregate amount of the commitments of the LC Lenders to issue letters of credit under the Exit RCF will be reduced from $50.0 million to $25.0 million. Letters of credit issued by Wells Fargo under the Exit RCF aggregating $19.4 million and $1.9 million expire in October 2023 and May 2024, respectively. Upon their expiration, Wells Fargo will have no further obligation as an Issuing Lender with respect to letters of credit.

Our total capacity for borrowings under the Exit RCF will not be impacted by the resignation of Wells Fargo and remains at $400.0 million, subject to the terms and conditions of the Exit Revolving Credit Agreement. The Exit RCF is scheduled to mature on April 22, 2026

Since receiving the Notice of Resignation, we have been in discussions with Wells Fargo and another member of the lending group (or the Replacement Agent) for the Replacement Agent to be appointed as the replacement administrative agent under the Exit Revolving Credit Agreement, as the replacement administrative agent under the Exit Term Loan Agreement, and as the replacement collateral agent and security trustee under the Collateral Agency and Intercreditor Agreement, dated as of April 23, 2021 (or the Intercreditor Agreement). We expect the resignation of Wells Fargo and the appointment of the Replacement Agent to be effective in mid-August 2023 (or the Resignation Effective Date). Upon the Resignation Effective Date, (i) Wells Fargo will be discharged from all of its duties and obligations as administrative agent under both the Exit Revolving Credit Agreement and the Exit Term Loan Agreement and as collateral agent and security trustee under the Intercreditor Agreement, and the Replacement Agent will be appointed to such roles, and (ii) Wells Fargo, as resigning collateral agent, will assign to the Replacement Agent all powers of attorney, security interests, mortgages, liens, collateral and other rights of Wells Fargo, as resigning collateral agent, as the mortgagee, secured party, security trustee, pledgee or beneficiary, of the security and the collateral under the collateral documents. Until such time as all such collateral is under the control of the Replacement Agent and all liens granted in favor of Wells Fargo in the collateral have been assigned to the Replacement Agent in accordance with the laws of each applicable jurisdiction, Wells Fargo shall continue to hold such collateral or liens and maintain such control over such collateral as a sub-agent, sub-trustee, and bailee of the Replacement Agent until an agreed upon outside date.

Borrowings under the Exit RCF may be used to finance capital expenditures, for working capital and other general corporate purposes. Availability of borrowings under the Exit RCF is subject to the satisfaction of certain conditions, including restrictions on borrowings, as provided in the Exit Revolving Credit Agreement. At June 30, 2023, we had borrowings outstanding of $182.5 million under the Exit RCF, including $3.5 million in payment-in-kind loans, and $21.3 million had been utilized for the issuance of letters of credit. The weighted average interest rate on the combined borrowings outstanding under the Exit RCF at June 30, 2023 was 9.45%.

At August 4, 2023, we had borrowings of $192.5 million outstanding under the Exit RCF and had utilized $18.6 million for the issuance of letters of credit. As of August 4, 2023, approximately $192.3 million was available for borrowings or the issuance of letters of credit under the Exit RCF, subject to its terms and conditions.

Exit Term Loan Credit Agreement

Our senior secured term loan credit agreement (or the Exit Term Loan Credit Agreement) provides for a $100.0 million senior secured term loan credit facility which is scheduled to mature on April 22, 2027. At June 30, 2023, $100.0 million was drawn under the facility (or the Exit Term Loans), and the interest rate applicable to borrowings outstanding under the Exit Term Loan Credit Agreement was 11.20%.