8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 15, 2006

Sea Containers Ltd.
(Exact name of registrant as specified in its charter)

Bermuda	1-7560	98-0038412
(State or other	(Commission File Number)	(I.R.S. Employer
jurisdiction of		Identification No.)
incorporation)

22 Victoria Street, Hamilton HM 12,  Bermuda

(Address of principal executive offices)  (Zip Code)

Registrant’s telephone number, including area code 441-295-2244

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.03              Bankruptcy or Receivership

On October 15, 2006, Sea Containers Ltd. (the “Company”) and its subsidiaries, Sea Containers Services Ltd. and Sea Containers Caribbean Inc., filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Chapter 11 Filing”).  No trustee, receiver or examiner has been appointed and the Company will operate as a debtor-in-possession.  On October 16, 2006 the Company initiated a complementary proceeding in Bermuda to facilitate the Chapter 11 Filing.  On October 17, 2006 the Company received approval for its “first day” motions from the United States Bankruptcy Court for the District of Delaware.  These motions provide the relief necessary to allow the Company to continue to operate in the normal course of business during its financial restructuring.  Included among the motions approved by the court are those relating to the Company’s ability to continue to pay employee salaries, wages and benefits in the ordinary course of business, to maintain its cash management systems, and to take other actions necessary to run the company with minimal disruption.  The Company intends to use the Chapter 11 reorganization process to complete its previously announced financial restructuring.

A press release of the Company, dated October 16, 2006, which provides more detail about the Chapter 11 Filing and certain related matters is attached hereto as Exhibit 99.1.  Also attached hereto as Exhibit 99.2 is a News Release, posted on the Company’s web site at www.seacontainers.com, which sets forth questions and answers relating to the Chapter 11 Filing and other related matters.  Exhibits 99.1 and 99.2 are incorporated herein in their entirety by reference.

ITEM 9.01	Financial Statements and Exhibits.
(c)		Exhibits
99.1		Press release dated October 16, 2006
99.2		Questions and Answers News Release

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SEA CONTAINERS LTD.
By:		/s/ Ian C. Durant
		Name: Ian C. Durant
		Title: Vice President - Finance
		and Chief Financial Officer

Date:  October 19, 2006

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EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated October 16, 2006
99.2	Questions and Answers News Release

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EX-99.1

EXHIBIT 99.1

[SEA CONTAINERS LTD. NEWS RELEASE]

SEA CONTAINERS LTD FILES FOR CHAPTER 11 PROTECTION TO ACHIEVE FINANCIAL RESTRUCTURING

·Protection sought for Sea Containers Ltd, Sea Containers Services Ltd and Sea Containers Caribbean Inc in order to achieve financial restructuring

·$115 million October 15, 2006 Public Notes not paid

·The companies remain under the control of their Boards of Directors

·No other subsidiary has filed for Chapter 11 protection

·Companies and business units in the group continue day-to-day operations as normal

·Sea Containers holds $67 million of unrestricted cash at October 14, 2006

·Outline proposals put to the note holders’ advisors and discussions on-going

·Sea Containers Services Ltd in discussions with Trustees of its pension Schemes and U.K. Pension Regulator

Hamilton, Bermuda, October 16, 2006.  Sea Containers Ltd. (Other OTC:  SCRA.PK and SCRB.PK, www.seacontainers.com) announced today that, in order to achieve a financial restructuring, Sea Containers Ltd and two subsidiaries, Sea Containers Services Ltd and Sea Containers Caribbean Inc, have voluntarily filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code. The filings were made on October 15 in the U.S. Bankruptcy Court for the District of Delaware.

Bob Mackenzie, President and Chief Executive Officer, said: “Although we have not paid the October 15 public notes, we are optimistic about the success of our restructuring program and our ability to reach agreement with creditors. The prime reason for seeking protection is to prevent any individual creditor from taking action on its own, which would be against the interests of Sea Containers and the majority of creditors. The Chapter 11 process is very different from Administration in the U.K., because the directors remain in charge. We continue with our business strategy and for our key operating units it will be ‘business as usual’. Chapter 11 will allow us the flexibility and the time needed to implement our reorganization plan and to move Sea Containers onto a sustainable financial footing. Much has already been achieved this year to improve Sea Containers’ finances, including the sale of Silja, the reduction by more than 50% of group debt and the recent refinancing of our containers.”

Other than the two subsidiaries listed above, no other subsidiary company within the group has filed for protection. Operating subsidiaries such as Great North Eastern Railway (GNER), the U.K. rail

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operator, and the SeaStreak ferry services in New Jersey, will continue their normal day to day operations. GE SeaCo, the joint venture container leasing business, is a completely separate business and is completely unaffected.

The filing companies have sought Chapter 11 protection because their directors concluded that a court-supervised reorganization will better enable the companies to restructure their debt, working co-operatively with creditors to place the respective companies on a sound and sustainable financial footing. On August 11, 2006, the Company stated that it would not pay the $115 million principal amount of the 10 ¾ % senior notes due on October 15, 2006, unless it concluded that it could pay in full the other public notes maturing in 2008, 2009 and 2012 and all other unsecured creditors, as well as retain sufficient working capital.

Since then, the Company has outlined a restructuring proposal to the advisors representing the ad-hoc committee of note holders and has had a number of discussions with these advisors with the aim of restructuring the Company’s public notes and other unsecured financial obligations. As described below, Sea Containers has also been in discussions with advisors to the trustees of Sea Containers’ two principal U.K. pension schemes. Although Sea Containers believes that progress has been made in these discussions, it has not been able to reach agreements with the necessary stakeholders prior to the October 15, 2006 maturity date of the 10 ¾ % notes. The Company has decided it cannot pay the October 15 notes at maturity, and is thus in payment default. The decision to seek Chapter 11 protection was taken by the directors of the filing companies by board action on October 14, 2006.

Sea Containers Ltd continues to operate under the direction of its Board and the Company’s subsidiaries remain under the control of their respective managements and boards of directors. It is intended that the filing companies will continue to function normally, with minimal change to the way they conduct business and be able to fund their continuing operations during the reorganization process. Sea Containers fully expects that there will be no interruptions to the payment of salaries and benefits for employees and that the filing companies will continue to meet supplier obligations incurred during the Chapter 11 process.  Sea Containers may initiate one or more complementary proceedings outside of the United States in order to facilitate the Chapter 11 process.

Cash Position

Sea Containers’ total cash on October 14, 2006 was $126 million of which approximately $59 million was either restricted as security for obligations to third parties or held in subsidiaries and could not be remitted back to the Company for various legal, regulatory or bank covenant reasons.

The remaining free cash of $67 million compares to $80 million as at July 31, 2006.  The main movements on free cash are the receipt of $40 million from the container refinancing and sale of containers (see below), the repayment of secured debt of $9 million, a net $23 million to meet both the recurring and non-recurring operating needs of the business and $16 million of restructuring costs. The free cash balance of Sea Containers Ltd on October 14, 2006 was $49 million, with the remaining $18 million held in subsidiaries available for group purposes.

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Pensions

In light of the deficits relating to the Sea Containers 1983 and 1990 Pension Schemes in the U.K., Sea Containers has sought to ensure that the restructuring takes account of the pension liabilities. The directors of Sea Containers Services Ltd are in discussions with the trustees of the 1983 and 1990 Schemes and the U.K. Pension Regulator about the future of those Schemes. The trustees of the 1983 and 1990 schemes have issued certain demands and notices, pursuant to legal requirements and the pension scheme rules, to Sea Containers Ltd and participating employers including Sea Containers Services Ltd. The trustees have appointed professional advisors to support them.

Active members of the 1983 Scheme were recently informed that the directors of Sea Containers Services Ltd, with the agreement of the trustees, had decided that active members should cease to accrue benefits for future service with effect from September 30, 2006. These employees will be given an opportunity to join the Sea Containers Group Stakeholder Pension Plan in the U.K. 

Containers

Sea Containers recently completed two transactions relating to its container operations.  These transactions represent a further step in Sea Containers’ strategy of simplifying its business and placing its finances on a sounder footing.

The first transaction, as reported in the Company’s SEC Form 8-K filed October 10, 2006, is a $160.7 million refinancing of containers, representing the bulk of those containers owned by Sea Containers but managed by GE SeaCo. The new facility is for a term of three years. This transaction assigns and refinances the existing 2001 container securitization, as well as repaying all other existing credit facilities secured by Sea Containers’ owned containers.

This transaction achieves a number of objectives. Firstly, it rationalized and simplified the existing container financing structure.  Secondly, it cured a number of existing covenant defaults in separate container financing facilities. Thirdly, it released approximately $16 million of cash liquidity to assist in the overall restructuring program. Fourthly, in connection with this transaction, certain containers and tanks were released from lien so that these units could be either sold or financed more efficiently.

In the second transaction, Sea Containers sold on October 13, 2006 its containers which are leased and managed outside GE SeaCo.  This business lacked critical mass and could not be efficiently operated by Sea Containers.  The sale of about 14,000 containers and tanks was made to Unitas Containers Limited, a global container leasing company based in Bermuda and London, delivering net proceeds of approximately $24 million to Sea Containers.  As a result of the above refinancing transaction, these containers were sold free of debt.

The overall liquidity released by the above two transactions amounts to approximately $40 million.  In addition the refinancing released from lien an approximate $15 million of containers for future sale or financing.

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GE SeaCo

The Company filed an SEC Form 8-K on October 4, 2006 regarding the GE SeaCo joint venture. In addition to providing audited financial statements for GE SeaCo and its subsidiaries, it reported that the Company had received letters from GE, asserting that there had been a change of control at Sea Containers Ltd. around March 20, 2006 when Mr James Sherwood (the founder of Sea Containers) resigned various positions including that of Chairman of the Board. Under the GE SeaCo joint venture agreements, a change of control at Sea Containers would enable GE to purchase its interest in the GE SeaCo joint venture, at an agreed or litigated valuation. On the basis of this assertion, GE also notified the Company that a valuation process should proceed.  The Company believes these assertions have no merit and, if necessary, will defend the action vigorously to protect its investment in GE SeaCo in the interest of Sea Containers’ shareholders and creditors. GE SeaCo continues to perform well, with both partners firmly focused on improving market competitiveness through cost reduction and improved technology.

Outstanding Debt

At October 14, 2006, Sea Containers had $650 million of consolidated debt outstanding.  This compares to $630 million (including shipyard debt, see below) at July 31, 2006.  The movement was an increase in container debt from the container refinancing of $29 million less a repayment of $9 million in relation to secured ferry debt.

The $20 million unsecured liability owed to a shipyard payable on September 30, 2006 was assigned to a financial investor and rescheduled for payment on October 15, 2006 to align with the repayment date of the October 2006 public notes.  This unsecured liability was also not paid on October 15.

GNER

The control and operations of GNER, the rail franchise that runs the East Coast Main Line in the U.K., are not affected by the Chapter 11 filings. Sea Containers and GNER have kept the U.K. Government’s Department for Transport abreast of developments, and GNER is not in breach of any of its franchise commitments.  GNER’s lines of credit and financial activities have been ‘ring-fenced’ from those of Sea Containers, apart from the standby credit and overdraft facilities mentioned in the August 11, 2006 news release of Sea Containers. These facilities are provided by Sea Containers as a condition of the franchise agreement and remain undrawn.

Employees of GNER and Sea Containers Railway Services Ltd (SCRS) do not participate in the Sea Containers U.K. pension schemes. They participate in separate U.K. schemes, the Railway Pension Scheme and an SCRS defined contribution scheme.

*    *    *    *    *

This news release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties.  These include statements regarding financial restructuring, funding continuing operations, reaching agreement with creditors, defending litigation claims, and similar matters that are not historical facts.  These statements are based on management’s current

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expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements.  Factors that may cause a difference include, but are not limited to, those mentioned in the news release, unknown effects on the transport markets in which the company operates of terrorist activity and any police or military response, varying customer demand and competitive considerations, inability to sustain price increases or to reduce costs, fluctuations in interest rates and currency values, variable fuel and electricity prices, uncertainty of negotiating and completing proposed sale, chartering or disposal transactions on acceptable terms, realization of asset sales proceeds less than related mortgage debt, inadequate sources of capital and unacceptability of proposed finance terms and inability to reduce debt, global, regional and industry economic conditions, shifting patterns and levels of regional passenger travel, seasonality and adverse weather conditions, possible lay-up of ships that cannot be sold, chartered out or redeployed and incurrence of lay-up costs, potential incurrence of disposal losses, restructuring charges and asset impairments greater than currently estimated, changes to or termination of pension plans resulting in acceleration of material unfunded pension liabilities, inability to restructure debts and other obligations, uncertain outcome of litigation claims and defenses, possible breach of the GNER franchise agreement resulting in amendment or loss of the franchise, and legislative, regulatory and political developments.  Further information regarding these and other factors is included in the filings by the company with the US Securities and Exchange Commission.

ENDS

For further information:

Questions and Answers relating to this release will be posted on www.seacontainers.com

Lisa Barnard

Director of Communications, Sea Containers group of companies

Tel: +44 207 805 5550

Email: lisa.barnard@seacontainers.com

Investor Relations enquiries:

William W. Galvin III, The Galvin Partnership

Tel: +1 (203) 618 9800

Email: wwg@galvinpartners.com

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EX-99.2

EXHIBIT 99.2

[SEA CONTAINERS LTD. NEWS RELEASE]

Questions and Answers relating to Sea Containers Ltd’s announcement on October 16 relating to its filing for Chapter 11 Protection

1.What is Chapter 11?

The phrase refers to Chapter 11 of Title 11 of the U.S. Bankruptcy Code that allows a company to seek the protection of the courts in order to continue normal day-to-day operations, while it addresses its financial challenges and develops a plan to reorganize.

2.What is the rationale behind Chapter 11?

It is thought that the value of a typical business as a going concern is far higher than the value of the sum of its parts if the assets of the business were to be sold off individually, especially in a ‘distress’ situation.

By seeking to reorganize under Chapter 11, the engine of the business is maintained rather than being dismantled, and the company can continue its day to day operations as normal during the reorganization process.  A company filing for Chapter 11 protection is required to submit a plan to demonstrate that the creditors of the business will end up with more value than they would in liquidation, which is known as Chapter 7.

3.What does Chapter 11 mean in practice for Sea Containers Ltd ( “Sea Containers” and/or “Company”) and the two subsidiaries which are also filing (together with Sea Containers Services Limited and Sea Containers Caribbean Inc, the “Filing Companies”)?

It gives the Filing Companies that seek protection a breathing spell free from hostile litigation and collection tactics by creditors seeking to recover debts, arising prior to the Chapter 11 filing, owed to them.  Otherwise it is ‘business as usual’ as our operations will continue to function as before and there will be very little change in the way that the Filing Companies carry on their day-to-day business.

4.Why did the Companies file for protection?

The filings are primarily intended to prevent any individual creditor from taking any action on its own which would be against the interests of Sea Containers and the other Filing Companies and their other creditors.  Because we have not paid the $115 million principal amount of the 10 ¾ % senior notes due on October 15, 2006, the Company is in payment default and therefore exposed.  Chapter 11 protection is therefore a preventative measure.  The directors of Sea Containers (together with the Boards of the other Filing Companies) decided that a court-supervised reorganization will better enable the Filing Companies to restructure their debt, working co-operatively with creditors to place the Filing Companies on a sound and sustainable footing.

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5.Why did you not make the payment?

We have made it consistently clear that we would only be making the payment on October 15 if the Company considered it would also be able to repay public notes which mature in 2008, 2009 and 2012, in addition to all unsecured creditors and retain sufficient working capital. We have to treat all unsecured creditors on an equal footing. As we approached that date, it was apparent that we are not able to meet those obligations without a financial restructuring of our debt and it was not possible to achieve that by the deadline of October 15.

6.Why did Sea Containers Ltd and two subsidiaries file for protection, but not the other subsidiary companies?

Sea Containers has quite a complex corporate structure with a large number of subsidiaries, and it was considered unnecessary and potentially costly for all subsidiaries to file.

7.Who made the decision to seek Chapter 11 protection and when?

The board of directors of each of the Filing Companies made the decision after receiving advice from their respective officers and advisors that it would be the best way forward for the  Filing Companies most effectively to complete the debt rescheduling that is needed to preserve value for stakeholders. The final approval for filing was taken by board action on October 14.

8.Which companies within the Sea Containers group of companies are affected?

Sea Containers Ltd, Sea Containers Services Ltd and Sea Containers Caribbean Inc.

9.Which companies have not filed?

Only the 3 Filing Companies have filed.  This means that GNER and others are NOT subject to Chapter 11 proceedings and/or any other insolvency process.  The GE SeaCo container leasing joint venture is completely separate and unaffected.

10.What is the process? Is protection automatically provided?

The ultimate goal of Chapter 11 is to confirm a plan of reorganization through which the debts and financial obligations are restructured.  To this end, a company generally prepares and files a proposed plan of reorganization which sets forth in detail the treatment of creditors and other stakeholders and describes how the reorganized enterprise will be funded.  This may include sale of assets, cash flow from future operations and/or restructuring around a core of operations.  If the plan meets the necessary statutory standards and receives the requisite approval from the creditors and other stakeholders, the bankruptcy court will confirm the plan of reorganization.

The U.S. Bankruptcy Code provides that when a debtor files a petition for Chapter 11 protection an “automatic stay” is immediately and automatically in effect which prevents creditors from taking action to collect on a pre-filing debt.

11.What if the plan is not approved or the parties in interest do not approve it?

The Company believes that it will be able to implement and confirm a plan of reorganization in these Chapter 11 cases.  However in the unlikely event that no plan of reorganization can be confirmed, the assets of the Filing Companies may be liquidated through a plan of

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liquidation confirmed in the Chapter 11 cases or through an alternative liquidation proceeding, which may include converting the Chapter 11 cases to cases under Chapter 7 of the U.S. Bankruptcy Code and/or through foreign insolvency proceedings.

12.How will Sea Containers subsidiaries be affected by the Chapter 11 filing?
As they are not subject to the reorganization proceedings, we do not expect the filing to have any significant impact on the day to day operations.

13.Does Chapter 11 mean you are going out of business?

Definitely not! This is not at all similar to going into liquidation or going into administration. Chapter 11 is a U.S. process which gives a company the breathing space it needs to re-schedule its debts in a way that reflects its financial position and the changing nature of its business.

14.How similar is it to going into U.K. Administration?

A UK administrator would take responsibility for managing and/or directing the management of the company. Typically (though not always), Administrators will seek to sell all or part of the company’s business and/or assets.  The Chapter 11 process allows the directors and management to remain in charge and provides the protection of the courts to allow time to achieve a restructuring.

15.Has the Company run out of cash?

Sea Containers total cash on October 14, 2006, was $126 million of which approximately $59 million was either restricted as security for obligations to third parties or held in subsidiaries and could not be remitted back to the Company for various legal, regulatory or bank covenant reasons. 

The remaining free cash of $67 million compares to $80 million as at July 31, 2006.  The main movements on free cash are the receipt of $40m from container refinancing and sale of containers (see below), the repayment of secured debt $9m, a net $23m outflow for operating performance and $16m restructuring costs. The free cash balance on Sea Containers Ltd at 14 October 2006 was $49m, with the remaining $18m held in subsidiaries available for group purposes.

16.How can a U.S. court protect a Bermuda incorporated company?

Sea Containers Ltd. is a Bermudan company with headquarters of many non-Bermudan subsidiary companies in London and other countries.  Sea Containers Ltd has assets in the United States principally consisting of, among other things, its ownership of Sea Containers America and its other U.S. wholly-owned subsidiaries.  Sea Containers Services Ltd. also has assets in the United States and is an affiliate of Sea Containers Ltd.  Sea Containers Caribbean Inc. is a U.S. company.  As such, each of the Filing Entities is eligible to file for Chapter 11.

17.Will the shares and the public notes still be traded?

The shares and public notes of Sea Containers Ltd. were suspended from trading on the NYSE on October 3.

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18.What benefits do you expect to come from a restructuring?

Although it is still too early to predict the impact a restructuring will have, we are optimistic that we can achieve an outcome which is in the best interests of stakeholders and will leave Sea Containers to emerge stronger and better able to meet its commitments going forward.  This will enable us to develop the two main elements of our business, containers and the GNER franchise, to create a sustainable business for the future.

19.How long will Sea Containers be in Chapter 11?

It is currently too early to say.  The Company intends to continue discussions with its principal creditor constituencies to propose a plan of reorganization in these Chapter 11 cases.  We are hopeful, having completed much of the preparatory work, that a plan can be confirmed expediently.

20.What is ‘Debtor-in-Possession’?

When a company files for Chapter 11 relief, the company continues to operate its business affairs and maintain control of its property as a debtor in possession (DIP).  As the DIP, a company is authorised to operate its business in the ordinary course without court approval, but subject to certain monthly reporting obligations imposed by the Bankruptcy Code.  The company, as a DIP, effectively acts in the interests of creditors and other stakeholders as well as shareholders.  A company as a DIP principally performs three main functions (with assistance of professional advisors): maintains and controls its assets and business operations, exercises special rights and powers created by operation of U.S. Bankruptcy law (including the ability to assume or reject, or assume and assign, certain types of contracts and leases) and proposes a plan of reorganization for its business.

21.What does Chapter 11 mean for the employees? How many are affected and will there be further redundancies?

The total number employed by the three companies in Chapter 11 is under 100 and all employees will continue to be paid and generally receive benefits just as they would normally expect.  However, on September 30, 2006 the Sea Containers 1983 Pension Scheme was closed to future accrual with the agreement of the trustees.

Seeking the protection of the courts does not imply any further reductions in the headcount as a direct result of the filing.  As Sea Containers continues to simplify its structure, the streamlining of staff is likely to continue.

22.What impact does it have on the U.K. pension funds?

The filing does not affect the U.K. pensions schemes directly, but Sea Containers has sought to ensure that the restructuring takes account of the pension liabilities. There are deficits relating to the Sea Containers 1983 and 1990 Pension Schemes in the U.K. and the directors of Sea Containers Services Ltd. are in discussions with those schemes trustees and with the UK Pension Regulator.

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23.What does Chapter 11 mean for suppliers to the companies concerned?

Sea Containers expects that the Filing Companies will continue to meet supplier obligations incurred during the Chapter 11 process.  Where possible and appropriate, the Filing Companies have tried to pay suppliers for goods and services supplied prior to filing.

24.Where should any creditor direct a claim against the company?

The Filing Companies have requested that the court appoint BMC Group as the official Claims and Noticing Agent for Sea Containers.  The Filing Companies expect that their request will be granted and in anticipation of such appointment, BMC Group has established a website where information regarding the Chapter 11 proceeding and all documents and claims filed in the case may be viewed, printed or downloaded at no cost.  Persons interested in obtaining such information may do so by going to www.bmcgroup.com/scl.

ENDS

For further information:

Lisa Barnard

Director of Communications, Sea Containers group of companies

Tel: +44 207 805 5550

Email: lisa.barnard@seacontainers.com

Investor Relations enquiries:

William W. Galvin III, The Galvin Partnership

Tel: +1 (203) 618 9800

Email: wwg@galvinpartners.com

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