On Wednesday, leading offshore services firm Bourbon Offshore announced that it has reached agreements with its lenders to restructure nearly $1 billion in debt, a significant part of its outstanding obligations.
"The confidence of our financial partners . . . is a tremendous encouragement for all those whose day-to-day efforts give life to Bourbon and prepare the innovative solutions of tomorrow in a profession facing profound changes," said Jacques de Chateauvieux, the firm's chairman and CEO.
Its partners have agreed to delay $390 million of medium- and long-term debt repayments that are coming due through next year. Just $70 million will be due in 2018, and the rest of Bourbon's long and medium-term debt – about $670 million – will be repaid between 2019 and 2025. The debt's interest spreads will increase over that period, rising to an average of three percent in 2020 and four percent in 2022.
The repayment of short-term debts totaling to $230 million will also be postponed, with interest spreads rising progressively in the same manner as the medium- and long-term debt.
Bourbon's revenue fell by nearly 25 percent last year as utilization plummeted and day rates declined. The firm has cold-stacked 104 vessels out of 514, and its average utilization rate has fallen to about 60 percent. Shallow-water offshore vessels were especially hard-hit, with utilization down to just 45 percent in the fourth quarter. The firm did not discuss its earnings in its most recent release, but it reported losses of $85 million in 2015 and $100 million in the first half of 2016, and revenue has declined since.
The debt restructuring is part of what Bourbon calls its “Stronger for Longer” initiative, and it reflects the firm’s belief that there will not be a quick turnaround in demand for offshore services. "The rise in oil prices and production limitation agreements are expected to have a favourable effect on oil companies’ investments. However, the anticipated effect on offshore activity will be delayed in time,” said Chateauvieux in a recent interview with Offshore Journal.
Even if demand should stabilize, oversupply may be a continuing problem for Bourbon and its competitors: utilization remains low, and the market is set to be flooded with newbuilds this year. VesselsValue estimates that a total of 465 OSVs will be completed in 2017, more than three times as many as last year. However, the forecast for new tonnage could change: offshore vessel operators have frequently delayed delivery or canceled orders for newbuilds over the past year, and a portion of this year’s deliveries may also be deferred.