Siem Offshore Needs Brazilian Banks Approval to Complete Restructuring
Siem Offshore is poised to become the latest company in the troubled offshore sector that has won hard-fought concessions to restructure its finances. In its latest update, Siem reported that it “has made good progress in its restructuring discussions with the secured lenders in Europe and leading bondholders.”
After a prolonged downturn in the offshore sector, in February 2020 Siem had warned that its existing agreements with its lenders for debt repayments were not sustainable due to the added pressures resulting from the coronavirus pandemic. The company, which operates a fleet of 25 vessels serving the oil and gas industry, entered into a standstill agreement with its secured lenders to defer payments until April 30, 2021, as a first step toward improving cash flow and liquidity to maintain operations.
Siem, however, noted that its restructuring plan depends on participation by the Brazilian banks, specifically naming BNDES and Banco do Brasil. “Several alternative solutions have been presented to the Brazilian banks,” the company said in its statement, noting “These solutions would ensure continued performance of the existing contracts in Brazil and support the credits provided by BNDES and Banco do Brasil.”
The restructuring plan for Siem involves the conversion of debt to equity and a reduction of future scheduled interest and amortization payments. The restructuring, the company noted, would lead to a significant dilution of the existing equity.
While Siem said it was hopeful that the current proposal would proceed they noted that there is no guarantee of a constructive response from the Brazilian banks. “Their support, however, is in their interest and would preserve value for BNDES and Banco do Brazil,” the statement said. “A rational behavior, therefore, suggests that a contribution to the plan by the Brazilian banks would be forthcoming. The alternative will be value destructive for the Brazilian banks.”
The contemplated restructuring plan would significantly strengthen Siem’s balance sheet. They said it would create a stronger financial platform to continue to support clients, preserve backlog, and meet the challenges in an extended downturn in the offshore supply market.
Siem is targeting approval of the restructuring plan in January 2021. The Company plans to send a more detailed update and call a bondholder meeting early in the new year.