US offshore drilling contractor Diamond Offshore has devised a comprehensive restructuring plan, supported by a majority of its bankers and bondholders, to help it emerge from Chapter 11 bankruptcy proceedings.

The Houston-based company said it has entered into a plan support agreement with holders of over 70% of each of its senior unsecured notes and revolving credit facility loans.

Sign up for our new energy transition newsletter

Gain valuable insight into the global oil and gas industry's energy transition from Accelerate, the new weekly newsletter from Upstream and Recharge. Sign up here.

The agreement outlines a comprehensive plan for deleveraging Diamond's balance sheet through the equitization of its senior unsecured notes, resulting in a reduction of over $2.1 billion of funded indebtedness.

In addition, certain holders of senior unsecured notes have agreed to invest up to $110 million of new capital in the form of first lien, last out exit notes, while certain holders of revolving credit facility loans have agreed to provide exit financing facilities in the form of:

(a) a $300 million to $400 million first lien, first out revolving credit facility and;

(b) a $100 million to $200 million first lien, last out term loan facility.

Marc Edwards, Diamond's chief executive, said: "The comprehensive plan support agreement we signed today raises new capital and is overwhelmingly supported by our banks and our bondholders. We look forward to emerging with a stronger balance sheet, significantly less debt, and increased financial flexibility. This agreement is a testament to the market's belief in Diamond and our world class team. With our improved capital structure, we will be in a strong position to capitalize on market opportunities as they emerge."

The company said it is seeking to emerge from the Chapter 11 Cases as quickly as the court's schedule and the requisite notice periods will permit.

The plan is designed to ensure that Diamond can continue to operate its fleet of offshore drilling rigs in a safe, reliable, and efficient manner in what continues to be a challenged market.

After the restructuring, Diamond said it will have a strong cash position with sufficient liquidity to benefit from an eventual market recovery.