13D Filing: Avenue Capital Management II, L.P. and Ocean Rig UDW Inc. (ORIG)

Item 3.

Source or Amount of Funds or Other Consideration.

Issuer issued the Common Shares that are the subject of this Schedule 13D in connection with schemes of arrangement under Cayman law.  The Schemes (as defined below) provided for substantial deleveraging of scheme companies through an exchange by their creditors, of approximately $3.7 billion principal amount of debt for new equity of the Issuer, approximately $288 million in cash and $450 million of new secured debt.

Item 4.

Purpose of Transaction.

During the second quarter of 2016, (1) Issuer’s board of directors and a number of creditors formed the conclusion that the Issuer’s debt obligations would need to be amended or exchanged for new debt and/or equity securities; (2) on August 11, 2016, Issuer made a public announcement stating that it was exploring restructuring options; and (3) on March 23, 2017, a Restructuring Support Agreement (the “RSA”) was executed between the Issuer and certain of its creditors to implement schemes of arrangement under the Companies Law of the Cayman Islands (the “Schemes”) and appoint joint provisional liquidators, as part of the proposed restructuring.

The Schemes were sanctioned and confirmed by the Grand Court of the Cayman Islands on September 15, 2017 (Cayman Islands time).  All of the conditions of the Schemes having been fulfilled, the Schemes became effective on September 22, 2017 (Cayman Islands time).

Pursuant to the Schemes, and subject to the conditions described therein, the Reporting Persons acquired beneficial ownership of 6,919,442 Common Shares⁷ of the Issuer.  Following consummation of the Schemes, the Issuer intends to increase the number of directors serving on its board of directors to seven.

References to, and descriptions of, the RSA and the Schemes are qualified in their entirety by reference to the RSA and the press releases of the Issuer dated July 21, 2017 and September 22, 2017, which are exhibits to this Schedule 13D and are incorporated in this Item 4 in their entirety where such references and descriptions appear.

The Reporting Persons acquired the Common Shares for investment purposes. The Reporting Persons intend to review their investment in the Issuer on a continuing basis. Depending on various factors, including, without limitation, the Issuer’s financial position and strategic direction, actions taken by the board of directors, price levels of the Common Shares, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate, including, without limitation, purchasing additional Common Shares and/or other equity, debt, notes, instruments or other securities of the Issuer (collectively, “Securities”), disposing of any or all of its Securities, in the open market or otherwise, at any time and from time to time, and engaging in any hedging or similar transactions with respect to the Securities. The Reporting Persons reserve the right to change their intention with respect to any and all matters referred to in subparagraphs (a) –(j) of Item 4 of Schedule 13D.

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⁷ See Item 5.