Offshore rig operator Seadrill announced Tuesday that it is having difficulty finalizing an agreement to restructure its secured debts, which total to about $8 billion.
Seadrill said that to improve its balance sheet, it wants to extend the maturity date of its bank loans by about five years; amend loan covenants; extend the maturity of unsecured loans out to 2025-2028; and to raise at least $1 billion in new capital. In an SEC filing Tuesday, the firm acknowledged that the plan is “likely to result in significant dilution to current shareholders and potential losses for other financial stakeholders."
"These negotiations have proved to be more complex than we had originally anticipated. 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," said CEO and president Per Wullf.
Carnegie analyst Frederik Lunde told Reuters that while the firm's bankers are in agreement on the restructuring plan, Seadrill’s other stakeholders are not. Lunde indicated that "if they don't reach their target by mid-February, they will move towards Chapter 11."
Wullf confirmed this view in comments to Norwegian outlet DN, saying that "if we do not get a deal through negotiations, [Chapter 11] is the way to go. If we do not get everyone to move on, we need to restructure through the court."
The value of Seadrill's shares has fallen by about one third since Tuesday’s announcement, and by about 95 percent since its peak in September 2013. Norwegian shipping magnate John Fredriksen is believed to have personally lost about $4.5 billion in the value of his stake over this period, although he retains the generous dividends Seadrill paid out from 2005 through 2014.
In comments Tuesday to Dagens Naeringsliv, Fredriksen said that Seadrill's financial situation was the result of poor management by a former associate, Tor Olav Trøim. "We have struggled since Trøim left the group. It was he who ran the financials. This has been a difficult process for us. There's a lot to clean up," Fredriksen said. Wullf echoed Fredriksen’s comments: "The strategies we followed during the Trøim era have failed completely," he said.
Analysts note that Seadrill's latest restructuring proposal – if adopted – assumes a dramatic increase in dayrates and utilization over the next several years, with new sales targets totaling to $1.3 billion in 2018, $2.4 billion in 2019 and $3 billion in 2020. Most observers forecast a more gradual recovery for the offshore sector.