A ‘big step’ on the way to a comprehensive solution to debt problems: This is how Borr Drilling, Tor Olav Trøim’s rig operator, describes the new agreement with its largest creditors to defer a total of $1.4 billion towards debt maturity, or 12.4 billion kroner.
The agreement covers Bohr’s obligations to its shipyards in Singapore, PPL and Keppel, which are now deferred from 2023 to 2025, the company wrote in a stock exchange announcement Monday morning.
The amount corresponds to approximately two-thirds of the debts and liabilities owed by Borr.
new problem
Trøim started Borr Drilling in 2016, and the recipe was to buy rigs on cheap sales after the market crash, as a result of the sharp and persistent drop in oil prices. But despite a promising start, the bets have soured as the recovery awaits, and it only got worse after the Corona pandemic hit the market in 2020.
Bohr and Trom several times engaged creditors and investors in solutions that led to significant debt delays. The last time was a little over a year ago, when the company had to complete its third issuance in nine months to get concessions from lenders.
New equity, and thus new dilution of existing shareholders, is part of the latest agreement. Among other things, Burr committed more than $50 million in accrued costs and interest in 2022, of which $22.4 million was already in January. To cover this conversion, Borr will raise about $30 million in a new stock issue.
Payments to shipyards in 2022 will reach the $24 million they are entitled to under an earlier debt agreement.
We must agree with others
Another important condition of the new agreement is that Borr must also reach an agreement with its other creditors, including bondholders, on deferring the remainder of the company’s debt by June next year.
These maturities should also be pushed back from 2023 to 2025 at the earliest — and if not, the shipyard’s debt maturities will revert back to what was originally planned. At the end of September, Bor had a total of $2.2 billion in debt and other liabilities, most of which was due in 2023.
Burr will continue negotiations with the remaining creditors, the company wrote. These include the major Norwegian banks DNB and Hayfin Fund, as well as convertible bond holders.
Despite these conditions, the agreement with the shipyards is well received on the Oslo Stock Exchange. Just before 3 p.m. Monday, the stock was up nearly 13 percent.
Estimated support
Borr Drilling highly appreciates the support it has received from its most important creditors. It’s a testament to the confidence in Borr Drilling, and to the market recovery we’re seeing now, Borr CEO Patrick Schorn says in the stock exchange announcement.
The company also adds that it expects to have “at least” 18 rigs in operation by the middle of next year, and that it will provide increased income compared to the 13 rigs currently in operation. Bohr has previously set itself the goal of having a full fleet of 23 drilling rigs by the end of 2022.
– We are in a position to take full advantage of the upswing in the market for crane rigs. Schorn adds that we believe this transaction benefits all stakeholders, by creating a long-term solution with improvements for both creditors and shareholders.
With Monday’s rally, the stock is up more than 35 percent so far this year, and is now trading at just over 20 crowns. However, it is miles away from heights of more than 400 kronor in 2018, when the rig market appeared to be heading in the right direction for some time, before optimism waned again in the fall.
The outlook for drilling companies now looks much brighter than it has in a long time, after underinvestment in oil and gas for several years. Although Borr is taking advantage of this and has taken a growing share of its contracted rigs, the company has long remained open to the need for a permanent debt solution. In its third-quarter report last month, the company said it had reached an agreement with one of its major creditors on the deferral, subject to agreements with other lenders.
In the previous edition, Christen Sveaas came in with an investment of close to NOK 100 million, buying shares for today’s match at just over NOK 14 per share (Bor’s shares were split together recently and the number halved). That gave him just over five percent of the stock in Burr. Trøim, for his part, has been watered down, although he has consistently contributed to new issues, and today owns just over six percent. (Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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