Houston based Paragon which is the latest casualty of an oil market filed for chapter 11 bankruptcy after the debt plan declaration. This was agreed with a turnaround plan which will reduce its debts by about $1.1 billion. This will in turn restructure the $2.7 billion debt.

According to the Wall Street Journal, Sinking oil prices have slowed drilling and production activities, taking a toll on companies like Paragon, which are competing for increasingly scarce business. Mexico's Petróleos Mexicanos and Brazilian state oil company Petróleo Brasileiro SA, or Petrobras, which have been big customers for Paragon, have moved to cut back their contracts.

Paragon Offshore has reached an agreement with 77% group's unsecured bondholders and 89% of senior lenders to give cash payments in return. This is to reduce the principal debt balance and thus modify or change the terms of loans.

Maritime News reported that, the bondholders according to Paragon's chapter 11 plan are being offered cash and a share of equity in the company. The bondholders agreed to accept $345 million dollars and 35% equity in restructured company. This is in exchange of forgiving debt of $984 million and also receiving another $50 million dollar in cash from the company's future profits.

"We have reached agreements that will allow Paragon to significantly reduce its debt while preserving majority ownership for existing equity holders", said president and CEO of Paragon Offshore, Randall Stilley. He added that, "The transaction, once implemented, will allow Paragon to eliminate more than 1.1 billion USD of debt and reduce annual cash interest payments by nearly $60 million."

When it comes to tax obligations, the Bloomberg Business said that, Noble will take on certain of Paragon's Mexican tax obligations. This amount totals to $8 million to $12 million over several years. David Williams, Chief Executive Officer of Noble said in a statement that the accord, "avoids the distraction and expense of the litigation which would have been inevitable following a bankruptcy filing, regardless of merit."

Paragon Offshore was also hit by the low crude oil prices and overcapacity on the market like most other companies in the offshore industry. Paragon has joined several other energy companies that have sought creditor protection amid the oil rout. Similarly, the owner of the largest fleet of shallow water drilling rigs in the Gulf of Mexico, Hercules Offshore Inc said that it is exploring strategic alternatives after its three months of emerging bankruptcy.

With the drastically reduced drilling activity last year, there have been big losses for the companies in the offshore industry as well as cutting of thousands of jobs. While Paragon confirmed that, the filing of bankruptcy would have "very little impact" on employees and with no effect on compensation or benefits.