Creditors Force DOF in Bankruptcy Wiping Out Shareholders
Creditors for the financially troubled offshore company DOF ASA requested that the Norwegian courts begin a bankruptcy proceeding for the company based on their belief that shareholders would not accept the final restructuring proposal. The board indicated that it would not oppose the filing nor contest a decision that DOF ASA will likely be insolvent in bankruptcy.
Under the plan put forth by the creditors, they entered into an agreement to acquire DOF Services, which represents all the ongoing operations of the company shortly after the court agreed to proceed with the bankruptcy. The creditors will implement the reorganization plan agreed upon with the company continuing the operations of DOF Services uninterrupted. The board said it anticipates there will be a short period between the signing and completion of the acquisition as it moved to reassure customers.
The bankruptcy came after the creditors' group lost confidence that the shareholders would support the revised restructuring plan agreed with the new board of DOF after the previous plan was voted down by shareholders in December 2022. What turned out to be the final step in the long struggle to complete the restructuring came this week as a group of dissident shareholders representing about 13 percent of the company’s shares requested another extraordinary shareholder meeting saying they planned to again oust the board less than two months after they had ousted the prior board.
“The board met persistent opposition from a group of shareholders and was not able to obtain such sufficient support,” the board wrote in its statement. “The board informed the reconstructor and the financial creditors,” they said after a failed last-minute attempt yesterday requested emails or texts from shareholders in support of the plan.
The plan would have reduced DOF’s approximately $2.5 billion in debt however giving the equity in the company to the creditors. Existing shareholders under the final proposal would have retained approximately 3.75 percent of the equity, which had increased from a proposed one percent in the terms that were voted down in December.
DOF’s board had warned repeatedly that it was facing a financial crisis saying that there had been no payments on the debt or interest in more than two years. Further, they said the company was likely insolvent based on the valuation of its assets. A report received from Deloitte this week however indicated “there is likely positive value in DOF ASA in a going concern scenario,” but the board said it would not contest that DOF ASA will be insolvent in bankruptcy.
“There will not be any value left to shareholders,” the DOF board said based on the bankruptcy filing. “The board highly regrets this result.”
The new board said it had looked for alternatives considering share offerings or the sale of assets. The creditors' group however said it would only accept alternatives within the limits of the previously agreed restructuring plan leaving few options. The company’s largest shareholder, Mogster Offshore controlled by Norwegian investor Helge Mogster, had indicated that it would vote its approximately 31.6 percent of the shares in favor of the restructuring but the dissidents had argued there was uneven treatment under the agreements, something that Mogster and DOF repeated denied.
DOF reports it has a fleet of nearly 60 purpose-built offshore vessels with global operations. At the end of 2022, the company had moved to consolidate all of its operations into DOF Services in anticipation of completing the financial reorganization.