Independence Contract Drilling: Prepackaged Chapter 11 and January 2025 Exit

Independence Contract Drilling, Inc. entered chapter 11 with a rare combination of speed and simplicity: a prepackaged plan, a single impaired voting class, and a balance-sheet solution that converted most of the convertible note debt into equity. Public coverage of the filing emphasized the rapid timeline and the goal of emerging as a private company with a lighter capital structure, while court filings show that the case was built around a pre-solicited plan and a short, court-supervised implementation window. The case offers a concise example of how a mid-market energy services company can use a prepack to stabilize liquidity, refinance a DIP, and reset governance without a prolonged operating restructuring.

For restructuring professionals, the matter is instructive because it ties together three practical themes: (i) a debt-for-equity conversion that left trade creditors unimpaired, (ii) a DIP structure designed to repay the prepetition ABL and bridge to an exit facility, and (iii) governance and incentive mechanics that were documented through a plan supplement instead of extended litigation. The public narrative around the restructuring stressed the company's improved liquidity and the elimination of more than $197 million of convertible notes, and the docket confirms that the plan achieved those ends on an accelerated timetable.

Prepackaged Restructuring Overview

Independence Contract Drilling filed chapter 11 on December 2, 2024 with a prepackaged plan and a prepetition solicitation already completed, which allowed the case to move at a compressed pace. The company publicly described the restructuring as a comprehensive agreement supported by noteholders and designed to delever the balance sheet and position the business for long-term success, and it framed the filing as a prepackaged proceeding intended to be short and targeted rather than a prolonged operating restructuring. The emergence announcement later underscored that the company completed the process in a matter of weeks and transitioned to private ownership with materially reduced debt, echoing the speed that a prepack is designed to achieve. Coverage of the filing similarly emphasized that the case was a rapid debt-swap plan rather than a traditional sale or liquidation path, with external reporting pointing to the debt load and the compressed restructuring timeline. The combination of the prepack design and the limited number of contested issues explains why the confirmation order and effective date followed quickly after the petition date.

The plan was structured around a single impaired voting class, with other creditor classes treated as unimpaired. That design is typical for prepackaged balance-sheet cases: the core capital providers negotiate a conversion of their debt into equity, while other creditor groups are paid in full or otherwise left unimpaired so that the case does not trigger widespread claims disputes. Public announcements about the restructuring stressed that unsecured creditors were not impaired and that the debt conversion would dramatically reduce leverage, and the confirmation timeline validated that outcome. The docket reflects a combined disclosure statement and confirmation process that allowed the court to approve the disclosure statement and confirm the plan on the same date, minimizing the time between filing and exit.

The case also illustrates the practical role of a small DIP term loan in a prepack. Rather than financing a lengthy operating period or a sale process, the DIP facility served as a bridge to exit financing and enabled the debtor to pay off its prepetition revolving ABL facility. That structure is common in prepacks where the estate wants to avoid a prolonged stay in chapter 11 but still needs sufficient liquidity to cover administrative obligations, fund operations during the confirmation window, and refinance the DIP at emergence. This case therefore provides a clear example of how a targeted DIP can be used to protect liquidity while the plan is implemented, without expanding the restructuring into a multi-month process.

Public-facing materials about the restructuring captured the headline outcomes: elimination of a large portion of the convertible debt, an emergence as a private company, and access to a new revolving credit facility. Those themes align with the plan mechanics in the docket, which relied on a conversion of notes into equity and the establishment of exit facilities to replace the DIP. In other words, the narrative presented to stakeholders and the technical plan terms in court filings reinforced each other, with the case ultimately functioning as a debt-for-equity swap plus a liquidity backstop rather than a sale or liquidation.

Business Background and Operating Footprint

Independence Contract Drilling and its affiliate Sidewinder Drilling provide land-based contract drilling services to oil and natural gas producers in the United States. The First Day Declaration describes a fleet of super-spec, pad-optimal rigs marketed under the ShaleDriller brand, designed to meet the needs of operators drilling multi-well pads and extended lateral wells. The company's business is rooted in providing high-performance rigs and drilling crews for technically demanding plays, and its operational footprint historically aligned with major shale basins where horizontal drilling and pad efficiencies are critical. At the time of the filing, management described meaningful exposure to activity in the Haynesville Shale and the Permian Basin, two regions that often drive domestic drilling demand but can also see rapid swings as commodity prices and operator budgets change.

The company's headquarters are in Houston, Texas, a common base for U.S. land-drilling contractors. The debtors reported a workforce of approximately 387 full-time employees around the petition date, highlighting that this was a mid-sized operating business rather than a shell or a purely financial holding company. The operational scale matters when evaluating a prepack because even a short chapter 11 case must maintain safe operations, payroll, and vendor relationships. A prepackaged plan can succeed only if it preserves the underlying business long enough to implement the plan; in ICD's case, the filings suggest that the company needed a streamlined process to avoid a prolonged disruption to drilling operations.

Court filings also emphasize the firm's specialization in pad drilling and operational efficiency. In the land-drilling sector, the ability to mobilize quickly and deliver consistent rig performance is critical for maintaining customer relationships, particularly when operators consolidate and become more selective about contractor performance. The ShaleDriller positioning indicates a focus on super-spec rigs that can command higher dayrates in stronger markets but can also face steep demand declines when operators reduce capital spending. That tension between high-spec equipment and cyclical demand created a backdrop for the company's restructuring.

Another way to frame the backdrop is the economics of land-drilling utilization. A rig fleet built for high-performance pad drilling typically carries higher capital costs and specialized crews, which can deliver strong margins when utilization is high and customer demand is stable. When activity declines, however, the fixed costs of maintaining equipment, crews, and yards do not drop in lockstep, and the business can face sudden margin compression. That is why liquidity and access to working capital become central in a downturn: the contractor still needs to fund maintenance, retain key personnel, and meet vendor obligations while rig activity softens. In ICD's case, the filings show that the company prioritized a rapid balance-sheet fix so that its operating profile could stabilize without the burden of a large secured debt stack. The prepackaged structure therefore paired the operating business with a reset balance sheet rather than forcing a prolonged operational restructuring that might have disrupted customers and field crews.

Drivers of Distress and Prepetition Process

The First Day Declaration describes a set of macro and industry pressures that converged in 2024. Management pointed to a capital markets environment that constrained refinancing options, customer consolidation that shifted demand toward the largest drilling contractors, and a sharp decline in Haynesville activity following natural gas price deterioration. The company also cited moderation in Permian demand tied to takeaway constraints and customer fiscal discipline. These forces combined to reduce the utilization and economics of the company's rig fleet, which in turn pressured liquidity as the company approached debt maturities.

The company also ran a prepetition marketing process that began in March 2024 but reportedly failed to yield bids sufficient to repay secured debt. That failed process is notable because it explains why the restructuring path focused on a balance-sheet solution rather than a sale. When a marketing process does not produce value in excess of secured debt, the estate often pivots toward a debt-for-equity conversion or a credit bid sale. In this case, the plan was supported by the noteholder group and pre-solicited before the chapter 11 filing, which allowed the debtors to avoid a drawn-out sale process and instead implement a consensual plan.

External coverage of the filing highlighted the debt load and the rapid nature of the case. Reporting described ICD as facing more than $230 million in debt and relying on a prepackaged plan to restructure that balance sheet. Public commentary at the time noted that the company's market challenges were acute, with a declining demand environment for drilling services. Those external perspectives align with the debtors description of liquidity pressure and reduced rig demand, reinforcing that the restructuring was driven by both macro conditions and capital structure constraints.

In many energy services cases, the question is whether the business can survive on a right-sized balance sheet if commodity prices and operator budgets stabilize. The ICD plan aimed to answer that question by converting the core debt stack into equity and delivering a new exit facility, thereby reducing fixed debt service while preserving access to liquidity. The plan did not attempt to solve industry volatility but instead reset the balance sheet so that the operating business could weather future cycles with less leverage.

Capital Structure at Filing

The debtors reported approximately $221.1 million of funded secured debt at the petition date, consisting primarily of convertible notes and a revolving ABL facility. The convertible notes carried cash and PIK interest features and a 2026 maturity, while the revolver provided working capital support secured by asset-based collateral. The restructuring strategy hinged on converting the notes into equity while leaving the ABL lender unimpaired, a structure that allowed the company to maintain working-capital liquidity while eliminating most of its long-term funded debt.

The prepackaged plan converted the noteholder debt into equity and provided a small exit term loan to noteholders, with the public restructuring announcement emphasizing that the plan was unanimously supported by the noteholders and that the debt swap would significantly delever the balance sheet. External reporting and firm announcements also describe the noteholders receiving 100% of the reorganized equity, underscoring the debt-for-equity nature of the plan. This structure is typical when the noteholders are the fulcrum class and can support a plan without extended litigation. It also explains why other creditor classes were left unimpaired: the noteholders provided the restructuring solution, while trade creditors and other stakeholders were largely paid in full.

Because the plan was prepackaged, the capital structure analysis was less about protracted creditor negotiations and more about aligning the plan mechanics with the prepetition support agreement. The plan nonetheless needed to address how the reorganized business would be capitalized, how the DIP would be refinanced, and how equity would be issued. Those mechanics were ultimately documented through the amended plan, disclosure statement, and plan supplement, which together detail the exit facilities, new equity issuance, and management incentive plan.

DIP Financing and Cash Collateral

The Final DIP Order authorized a superpriority senior secured term loan facility of up to $32.5 million, with interim availability of $27.5 million and the remainder available upon entry of the final order. Glendon Capital Management and MSD Partners provided the DIP financing. A key feature of the DIP package was its use of proceeds to pay off all outstanding prepetition revolving ABL loans, effectively collapsing the prepetition revolving debt into the DIP structure and clearing the path for an exit revolver once the plan became effective.

The DIP order also included cash management and collateral protections that are common in energy services cases. For example, the debtors deposited approximately $276,738.87 with Wells Fargo Bank to cash-collateralize letter-of-credit and bank product obligations, ensuring that cash management arrangements remained stable during the case. The order contained a professional fee carve-out that covered U.S. Trustee and clerk fees, a capped chapter 7 trustee allowance, and specific limits on debtor professional fees after a trigger notice. Those provisions reflect the balance between protecting collateral for the DIP lenders and preserving estate resources for the professionals required to implement the plan.

Remedies and notice mechanics in the DIP order also reflected a relatively controlled process: any default would trigger a notice period during which parties could seek emergency relief, and the lenders were required to follow procedural steps before exercising remedies. In a prepackaged case, these mechanics matter because the plan is designed to close quickly, and the DIP is expected to be refinanced by the exit term loan facility. The DIP therefore serves as a short-term bridge rather than a long-term financing solution, and the default and remedy structure is designed to avoid disruptions during the confirmation window.

Plan Terms, Exit Facilities, and Governance

The Amended Plan and Disclosure Statement confirm the core economic deal: noteholders receive 100% of the new common equity, subject to dilution for a management incentive plan, and receive a $7.5 million allocation of exit term loan financing tied to additional note claims. The Disclosure Statement projected a 50%-64% recovery range for noteholders based on the plan economics and noted that the reorganized equity would not be publicly listed. This combination of full equity ownership and a modest exit term loan reflects a typical prepack in which debt converts into equity while a small amount of new money or exit debt provides working-capital liquidity.

The plan also contemplated Exit Facilities consisting of an Exit ABL facility and an Exit Term Loan facility. The DIP claims were satisfied through distributions of cash and/or commitments under the exit term loan documents, effectively refinancing the DIP at emergence. The exit facilities were required to be in form acceptable to the noteholder group, reinforcing the negotiated nature of the plan. Public announcements about the restructuring referenced an exit financing package of approximately $40 million, and later emergence coverage highlighted an undrawn $30 million revolver immediately available to the reorganized business. That public framing matches the plan structure and the court-approved exit facilities.

Governance and incentives were addressed through the Plan Supplement. The amended plan created a management incentive plan reserving up to 10% of the new common stock (or equivalent equity awards) on a fully diluted basis, with the new board determining award terms, allocation, vesting, and performance metrics. The plan contemplated finalizing the incentive program within 60 days of the effective date, indicating that the post-emergence governance mechanics were intended to be implemented quickly. The plan supplement also included an exhibit identifying the new board and an exhibit listing insiders potentially participating in the management incentive plan, including Anthony Gallegos, Philip Choyce, Philip Dalrymple, Scott Keller, Katherine Kokenes, and Marc Noel. This is a common approach in prepacks: governance is addressed through plan supplements and board lists rather than negotiated in the courtroom.

The plan preserved unimpaired treatment for non-noteholder creditor classes. Revolving ABL claims were treated as unimpaired and were effectively rolled into the exit ABL facility, while general unsecured claims were unimpaired. Public statements about the restructuring repeatedly emphasized that unsecured creditors were not impaired, underscoring that the case was fundamentally a balance-sheet transaction between the company and its noteholders. That treatment allowed the plan to proceed without widespread creditor opposition and limited the need for extensive contested hearings.

The case also illustrates how law firms and financial advisors position a prepack. Sidley Austin served as debtors counsel, while Latham and Watkins represented the noteholders. Public firm announcements highlighted the speed and success of the restructuring, reflecting the professional services dimension of prepackaged cases where counsel and advisors focus on delivering a quick emergence rather than extended litigation. The fee orders in the docket show that the professional fees were relatively contained compared to longer cases, which is consistent with the short timeline.

Claim Treatment, Releases, and Case Administration

A prepackaged plan only works when creditor treatment is clear and the confirmation record is clean. In this case, the plan organized creditor classes around a single impaired voting class and a set of unimpaired classes that were deemed to accept. That structure narrowed the number of classes required to vote and allowed the debtors to focus solicitation and court approval on the noteholder class. The Confirmation Order approved a combined disclosure statement and confirmation process, which is typical when the plan is pre-solicited and the court is satisfied that notice and voting procedures are adequate.

Class structure and treatment. The plan addressed several classes of claims, with the notes class as the only impaired voting class. Other secured and priority claims were unimpaired, while general unsecured claims were also treated as unimpaired. That means those claimholders were entitled to payment in full or otherwise to receive the legal equivalent of full payment and were deemed to accept the plan. The resulting structure reflects a common prepack pattern in which the fulcrum noteholders provide the restructuring solution while trade and other constituencies are kept out of the voting battle.

Releases, exculpation, and injunction. The Confirmation Order approved a release package that included debtor releases and third-party releases tied to plan support. Third-party releases were structured around opt-out mechanics, meaning that parties who did not opt out by the applicable deadline were deemed to have consented. The order also approved an exculpation provision and plan injunction that protected parties involved in plan negotiations and implementation, while carving out claims based on actual fraud, gross negligence, or willful misconduct. In a prepack, these provisions are often a key part of the negotiated deal because they provide the parties implementing the plan with finality and reduce the risk of post-effective litigation.

Claims administration and case closing. The cases closed quickly after the effective date, reflecting the streamlined nature of the plan and the absence of extended claims litigation. The Final Decree entered on March 14, 2025 closed the cases after the plan went effective in mid-January, underscoring that this was a short, execution-focused chapter 11. The retention of a claims and noticing agent also supported the compressed timeline by centralizing notice, ballots, and claims administration for the small number of constituents required to vote or receive distributions.

Professional fees and case cost profile. The professional fees approved in the docket provide a sense of the cost profile of the restructuring. Sidley Austin served as lead debtor's counsel, with Riveron RTS as financial advisor and Piper Sandler as investment banker. Fee orders reflected a relatively limited fee run for the short case: Sidley received a final fee allowance of $830,475.72 for the early case period, Piper Sandler received $1,979,986.60 for its investment banking services, and Riveron RTS received $267,012.50 for its advisory work. Those totals underscore that even a prepackaged case with a quick exit still requires substantial professional resources, but the duration and scale are typically lower than in a contested sale or multi-month plan process.

Taken together, these administration and release mechanics illustrate the broader policy goal of prepacks: to minimize courtroom time while still producing a confirmed plan that binds creditors, implements new capital structure documents, and resolves potential litigation risk through negotiated releases. The Independence Contract Drilling case is a clean example of that approach, with a straightforward voting structure, quick confirmation, and a rapid transition to post-emergence governance.

Timeline of Key Milestones

Frequently Asked Questions

When did Independence Contract Drilling file chapter 11?

Independence Contract Drilling and Sidewinder Drilling filed voluntary chapter 11 petitions on December 2, 2024, initiating a prepackaged restructuring designed to move quickly through confirmation.

Which court handled the case?

The cases were filed in the U.S. Bankruptcy Court for the Southern District of Texas (Houston Division), with Independence Contract Drilling as the lead debtor and Sidewinder Drilling LLC as a jointly administered affiliate.

Was the restructuring prepackaged?

Yes. The debtors entered chapter 11 with a prepackaged plan and a prepetition solicitation completed, and the company publicly described the filing as a prepackaged restructuring supported by noteholders and designed to be a rapid debt-swap solution. The same public materials framed the plan as a comprehensive agreement that would significantly delever the balance sheet and deliver a faster emergence timetable.

What did noteholders receive under the plan?

Holders of the senior secured convertible notes received 100% of the new common equity in the reorganized company, subject to dilution for the management incentive plan, and also received $7.5 million of exit term loan financing tied to the additional notes. Public announcements by the noteholder advisors emphasized that noteholders would own all of the reorganized equity through the debt-for-equity conversion.

Were unsecured creditors impaired?

No. The restructuring announcements emphasized that unsecured creditors were not impaired, and the plan treated general unsecured claims as unimpaired, consistent with a balance-sheet transaction focused on converting the secured notes to equity.

What was the DIP financing?

The Final DIP Order approved a superpriority senior secured term loan facility of up to $32.5 million. The facility was used to pay off the prepetition ABL revolver and provide liquidity during the short confirmation period, with the exit term loan facility refinancing the DIP at emergence.

When did ICD emerge and what changed at exit?

The company announced its emergence on January 20, 2025 and described the exit as a transition to private ownership with more than $197 million of convertible debt eliminated and an undrawn $30 million revolving credit facility available for liquidity. Those announcements emphasized a streamlined cost structure and improved working capital position following the debt-for-equity conversion.

Who is the claims agent for Independence Contract Drilling?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more chapter 11 case coverage, visit the ElevenFlo bankruptcy blog.