Bourbon Files for Reorganization
Blue-chip offshore vessel operator Bourbon Corporation announced Thursday that it has filed for bankruptcy proceedings (redressement judiciaire) with a court in Marseilles.
The move follows a demand from Chinese bank ICBC that Bourbon Corporation repay all outstanding rental payments up to 2026. Bourbon sued to stop the demand, but the Commercial Court of Marseilles ruled in favor of ICBC and determined that Bourbon is insolvent.
Under French law, the reorganization proceedings will freeze existing liabilities for an observation period, which can last up to 18 months. The purpose of this procedure is to enable the debtor to present a plan for continuation by reorganizing its debt, which may be rescheduled over a maximum period of 10 years.
The reorganization proceedings only concern the firm's holding company, Bourbon Corporation, and will not affect Bourbon's operating companies, which will continue business as usual, the firm said. Bourbon hopes that it will be able to preserve its operations until the market turns around.
Prior to the disagreement with ICBC, Bourbon was negotiating with its creditors on two possible options for repayment: a writedown with the possibility of sharing in the financial benefits of a future market recovery, or a debt-for-equity swap. Bourbon said that it had reached an agreement on terms with a group of banks including ICBC in June.
The offshore downturn that began in 2014-15 has dogged the sector for years, and Bourbon is no exception. Global offshore fleet utilization has remained stubbornly low, and overcapacity has weighed heavily on firms that borrowed to build up their fleets before the crash. In July 2018, after an extended period of downsizing and losses, Bourbon's creditors agreed to allow it to withhold repayment and servicing of its debts, and the parties extended this arrangement in January 2019.
Many of Bourbon's competitors in the OSV / offshore services segment have already addressed the financial challenges of the weak market using bankruptcy proceedings, allowing them to shed billions of dollars of debt from their balance sheets and move forward without the burden of regular payments. American operator Tidewater eliminated $1.6 billion in loans under a prepackaged bankruptcy in 2017, then acquired competitor Gulfmark, which had recently shed about $430 million in debt through its own bankruptcy reorganization.