May. 16 at 3:39 PM
$RIG Historically, the biggest weight dragging down RIG’s stock price has been its massive, suffocating debt load (~
$4.9 billion).
$VAL, conversely, emerged from its past restructuring with an incredibly clean balance sheet, carrying very low net debt (around
$425 million) and a healthy cash hoard.By using an all-stock transaction, RIG isn't adding a penny of new debt to buy Valaris.Instead, they are blending RIG’s heavy debt with VAL’s clean balance sheet. Management notes this will immediately drop the combined entity's leverage ratio down to a highly conservative 1.5x within 24 months. This balance sheet transformation alone will trigger an equity re-rating. Because of Valaris's past Chapter 11 restructuring, its ultra-modern hardware (including 31 high-spec jackups and premier drillships) is heavily undervalued on its balance sheet.RIG is paying
$5.8 billion in equity for assets that would cost double or triple that to build from scratch... I need another post
