Long-Term Debt

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Long-Term Debt

6. Long-Term Debt

At June 30, 2024 and December 31, 2023, the carrying value of our long-term debt, net of unamortized debt issuance costs, was comprised as follows (in thousands):

	June 30,		December 31,
	2024		2023
$550 Million Senior Secured Second Lien Notes due 2030	$	534,480	$	533,514

Second Lien Notes

On September 21, 2023, Diamond Foreign Asset Company and Diamond Finance, LLC (collectively referred to as the Issuers) issued $550.0 million aggregate principal amount of 8.5% Senior Secured Second Lien Notes due October 2030 (or the Second Lien Notes) with interest payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2024. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Diamond Offshore Drilling, Inc. (or DODI) and each of its existing restricted subsidiaries (other than the Issuers) and by certain of DODI’s future restricted subsidiaries (other than the Issuers).

The Second Lien Notes obligate DODI and its specified subsidiaries to comply with an indenture dated as of September 21, 2023 (or the Indenture) entered into by the Issuers, DODI and certain of its subsidiaries named therein and HSBC Bank USA, National Association. The Indenture contains covenants that, among other things, restrict DODI’s ability and the ability of certain of its subsidiaries to: (i) incur additional debt and issue certain preferred stock; (ii) incur or create liens; (iii) make certain dividends, distributions, investments and other restricted payments; (iv) sell or otherwise dispose of certain assets; (v) engage in certain transactions with affiliates; and (vi) merge, consolidate, amalgamate or sell, transfer, lease or otherwise dispose of all or substantially all of DODI’s assets. These covenants are subject to important exceptions and qualifications.

The Second Lien Notes were valued at par at issuance and were presented net of unamortized debt issuance costs of $15.5 million and $16.5 million, at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024, the effective interest rate on the Second Lien Notes was 9.10%.

Revolving Credit Agreement

Our revolving credit agreement provides for a $300.0 million senior secured revolving credit facility (or RCF), which is scheduled to mature on April 22, 2026. Borrowings under the RCF may be used to finance capital expenditures, pay fees, commissions and expenses in connection with the loan transactions, and for working capital and other general corporate purposes. Availability of borrowings under the RCF is subject to the satisfaction of certain conditions, including restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, (i) the aggregate amount of Available Cash (as defined in the RCF) would exceed $125.0 million, (ii) the RCF Collateral Coverage Ratio (as defined in the RCF) would be less than 2.00 to 1.00 or (iii) the Total Collateral Coverage Ratio (as defined in the RCF) would be less than 1.30 to 1.00.

At June 30, 2024 and August 5, 2024, we had no borrowings outstanding under the RCF. As of August 5, 2024, approximately $300.0 million was available for borrowings under the RCF subject to its terms and conditions.

There is no capacity for the issuance of new letters of credit under the RCF, but the RCF permits us to obtain up to $50.0 million in letters of credit outside the RCF. We have obtained a separate $25.0 million letter of credit facility; however, letters of credit thereunder must be cash collateralized. During the second quarter of 2024, we utilized $1.9 million of this facility for the issuance of a letter of credit, which will expire in May 2025.

At June 30, 2024, we were in compliance with all covenants under the Second Lien Notes and the RCF.