Seadrill dips 25% amid challenging debt revamp talks

LONDON: Seadrill Ltd, the offshore driller with the heaviest debt load, dropped as much as 25% yesterday to the lowest since November as equity investors face “significant dilution” with the debt restructuring process.

The company is seeking to raise at least US$1bil in new capital and is in talks with billionaire-owner John Fredriksen and new investors, it said in a statement. The driller also proposed extending unsecured claims maturities out 2025 to 2028, pushing bank maturities out to 2021 to 2023, amending financial covenants and reducing fixed amortisation, it said.

“These negotiations have proved to be more complex than we had originally anticipated,” CEO Per Wullf said in the statement. “Nevertheless, key stakeholders have demonstrated a clear desire to be part of a solution and with the right structure and terms we believe there is significant capital available to us.”

Seadrill, which had US$8.9bil in net interest bearing debt at the end of the third quarter, and other offshore-rig operators have been hit hard by the collapse in crude prices over the past two years as oil companies slashed spending on services such as drilling. The pain has been compounded by a wave of new rigs, creating massive oversupply in the industry and decimating rental rates.

Shares fell as much as 25%, the most since January, 2016, and were down 20% in Oslo trading with more than double the three-month daily average traded so far. The stock is down about 40% so far this year.

The London-based company is continuing talks with Fredriksen’s Hemen Holdings Ltd, banks, potential new money investors and an ad hoc committee of bondholders, it said. It aims to reach a deal on a consensual, comprehensive restructuring before April 30, when the West Eminence facility matures, with implementation during the second quarter.

An alternative restructuring proposal submitted by bondholders in December includes the injection of US$700mil of new secured notes

provided by creditors, the swap into equity US$1.05bil of unsecured bonds and the conversion of the remaining US$1.25bil of notes into convertible bonds, they said in a separate statement. That would leave current shareholders holding “out of the money warrants” after the restructuring, they said.

“Not surprisingly, bondholders are putting up a fight,” said Harald Oyen, an analyst at SEB AB in Oslo. “Although it seems dramatic as the share is taking a big hit, no one should have expected the bondholders to roll over”. – Bloomberg