Update: Seadrill Outstanding Shares Up 5% Post Bond Conversion

Jul.28.14 | About: Seadrill Limited (SDRL)


Seadrill will issue 24 million new shares following voluntary bond conversion.

Anticipated in previous analysis; one-time cash cost of $78 million and $71 million net higher annual costs.

Continue to be bullish on Seadrill; Board perspective clarified by process.

On July 28, Seadrill (NYSE:SDRL) announced that its voluntary offer to convert $650 million in 3.375% bonds was accepted by virtually all of its bondholders. As a result, SDRL has increased common shares outstanding by 4.8% to 493 million. The conversion will cost the company an additional $95 million annually, while saving $24 million in bond payments. Sweetener payments added an additional $78 million in one-time costs.

The conversion, while costly from a cash perspective was expected, with participation slightly higher than originally anticipated. As previously reported, the bond conversion was a start-and-stop process, with the Company's initial July 8 plan cancelled on July 9 and then relaunched in slightly modified form on July 18.

I am still bullish, for expected market improvements driven by geo-political events, overall on SDRL and the sector. This transaction, in my opinion, could have been handled better, but clarified the Board's position with respect to the treatment of certain stakeholders.

This article reflects the personal opinions of the author and should not be relied upon or used as a basis in making an investment decision. Investors should always do their own due diligence prior to making an investment decision.

Disclosure: The author is long SDRL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.