Clearly, Norwegian restructurings of offshore companies are like buses: you wait for ages and suddenly three come along at once.
Last week we covered the US$1 billion debt-for-equity swap that will see Solstad shed much of its debt load and try to shrink its fleet by over a quarter (here).
But Solstad wasn't alone in battening down the hatches for the storm that $30 oil has unleashed on the industry. Norwegian compatriots Boa and Havila Shipping have also been lashing their creditors to the decks to try to stave off the crisis.
For both Havila and Boa this was their second restructuring since the oil price collapse of 2014. This is significant, as it shows us how companies are running out of time to pay back debts that have already been rescheduled once before.
The market was bad in 2016, before hitting rock bottom in 2017. It now seems that it is set to lurch down again.
In 2016, Havila Shipping's banks and bondholders agreed the time-honoured Norwegian banking solution of delaying and deferring payment.
They agreed to accept warrants on the losses which might arise from the sale of eight vessels deemed non-core, warrants which could be swapped for shares in Havila. The controlling Saevik family coughed up NOK77 million (US$7.5 million) in new equity via a private placement from their vehicle Havila Holding, and also put in another NOK41 million as a convertible loan as protection of dilution of ownership, if and when secured creditors were to convert their warrants to shares after vessels were sold at a loss.
In return, unpaid interest of NOK31 million was not paid by Havila, but was added to the principal on each loan. The controlling family retained control, the lenders took some equity, and the problem was deferred until 2020. Hurray!
In 2018 Havila was able to sell three large, older PSVs of over 4,600 deadweight tons apiece: Havila Fortress (built 1996), Havila Faith (built 1997) and Havila Favour (built 1998). In 2019, the company tried to offload further PSVs, but without success, leaving it with a fleet of 23 vessels, including three 12,000kW anchor handlers in long term lay up in Fosnavag, Norway.
Unfortunately, this year is not a great year for solving the problems of indebted offshore ship owners, and not a great time to be trying to dispose of vessels.
On April 7, Havila announced a further restructuring of the over NOK4.2 billion (US$400 million) of debt which it owes (here) for another five years up to December 31, 2024, at which point all its debts will be due repayment, unless lenders agree to a one year extension.
To deal with immediate liquidity issues, the Saevik family, through Havila Holding, agreed to provide another NOK100 million as a loan. Interest will be waived by lenders on about a quarter of the debt. Every quarter, another NOK65 million of debt will be transferred to the non-interest paying tranche.
At the end of the five years, when the clock strikes midnight on December 31, 2024, the non-interest-bearing debt will be converted to shares in the company.
The conversion of non-interest-bearing tranche will have the fairytale effect that lenders will receive shares representing up to a 47 per cent maximum ownership of the company, thus miraculously enabling the Saevik family to retain their magic 50 per cent controlling stake. Let's see how that works out.
In Bourbon, efforts by the controlling Chateauvieux family to maintain control failed when the company fell into bankruptcy in late 2019 (here). For now, though, the Saeviks have achieved what the Solstad and Farstad families failed to do, and retain control.
In November 2016, Boa announced it, too, was suspending payment of interest on its debts, and sought a restructuring, which was completed in 2017 (here).
Predictably, this restructuring included for Boa's outstanding corporate bonds to be extended with new maturity dates in December 2020, for cash interest payments to be deferred, and for a full amortisation holiday until maturity (i.e. Boa would pay down none of the capital of the loans). The usual.
This, of course, preserved the control of Ole T. Bjornevik and his family, which owns Taubatkompaniet, Boa's controlling shareholder.
Boa seemed to be doing everything right to position itself against further turbulence. In 2019 it sold two seismic vessels Boa Galatea and Boa Thalassa to SeaBird Exploration in a transaction worth NOK185 million in cash and SeaBird shares.
In October last year, the company announced that it had secured five-year firm charters, along with five additional optional extension years for its two large anchor handlers Boa Bison and Boa Jarl (each DP2, 16,000 kW with 270 tonnes bollard pull) with the Norwegian Defence Logistic Organisation, as part of Norway's emergency response preparedness.
With good timing, this took the vessels out of the North Sea spot market, and diversified the company's risk away from the oil and gas market. The company had long since been trying, and failing, to sell them.
The charter was part of a restructuring of Norway's emergency response structure, as the Norwegian Navy assumed responsibility oceangoing tug emergency response preparedness from the Ministry of Transport on January 1, 2020, using the two vessels hired from Boa and four of its own ships. Boa announced that the pair would be, "included in the armed forces structure and the coast guard's operation and maintenance routines." So far, so good.
The same month, Boa announced (here) a major contract with Eiffage, a subcontractor to BP in the Greater Tortue Ahmeyim Field development offshore Senegal and Mauritania.
Eiffage would hire Boa's semi-submersible barge Boa Barge 33 to transport twenty-one massive concrete caissons, each weighing 16,000 tonnes, from Dakar, towed by two ASD tugs Boa Brage and Boa Heimdal. The operation was due to commence in March, but this was derailed by the Covid virus.
BP declared force majeure on the contracts associated with the project (as announced by Reuters here), claiming that the pandemic had made it impossible for the work to progress on time, and that there would be a one year delay in the execution. Rather than steaming towards Dakar, both Boa tugs remain off Norway, according current to AIS data.
So, at the end of March, Boa also announced plans to restructure (here) after it announced a fourth quarter loss for 2019 of NOK127 million (US$12 million).
"Current limitations, and unpredictable room for a proper and attractive running of the company need imminent actions to keep key personnel," the company warned. Predictably, these changes include negotiating an extended maturity dates for bond and bank loans which had original maturity in 2020, including a NOK1.2 billion bond paying a notional 9.75 per cent coupon. Don't hang your hopes on receiving a full and complete payment of that bond just yet.
Whilst the Norwegian lenders were engaged in these complex and convoluted negotiations, Hornbeck Offshore reminded everyone how Americans like to keep things simple.
On April 3, Hornbeck announced it was negotiating a plan with creditors to ease its $1.2 billion debt load by filing for Chapter 11 bankruptcy in the Southern District of Texas.
This followed the failure of a last-ditch effort by the company to swap out US$674 million of bonds. This would have involve pushing out the maturity dates of the notes, and it also included a cash offer to repurchase up to US$67 million of certain categories of unsecured debt at up to 30 cents on the dollar.
Unfortunately, this European-style deal failed to achieve the necessary 99 per cent support of the bondholders, so, faced with default and a cash crunch, Hornbeck has announced it will go into Chapter 11.
The company blamed, "circumstances surrounding Covid-19 and the precipitous decline in oil prices," for the failure of the swap. At least Hornbeck's creditors don't have to wait five years to see what they get for their debt, and Hornbeck's shareholders can be pretty certain what their equity in the company is now worth. Zero.
