Seadrill enters first phase of refinancing plan

Deepwater drilling contractor Seadrill has reached an agreement with its banking group to extend its three nearest maturing borrowing facilities and amend certain covenants across its secured credit facilities, as the first phase of a broader plan to refinance and recapitalize the business.

According to the company’s press release on Friday, the facility extensions relate to:

– The $450 million credit facility originally maturing in June 2016 is now extended until December 2016;
– The $400 million credit facility originally maturing in December 2016 extended until May 2017;
– The $2.0 billion NADL credit facility originally maturing in April 2017 extended until June 2017.

The covenant amendments extend to June 30, 2017 and relate to the following:

– A reset of the leverage covenant.
– A revised definition of the Equity Ratio to exclude the impact of any change to the market value of the company’s rigs.
– A suspension of the provision that allows lenders to receive a prepayment under their secured credit facilities if rig values decline below a minimum value relative to the loan balance outstanding.

Seadrill said it has agreed a set of milestones which provide a timetable for advancing discussions around a longer term solution. Further, the company has agreed not to draw any of the $467 million available to it under its revolving credit facilities and to an increase in the minimum liquidity covenant contained in its secured credit facilities from $150 million to $250 million during the negotiating period.

The company said its aim was to conclude negotiations with its stakeholders by the year end.

Mark Morris, Chief Financial Officer said: “This is an important first step in our funding plan. By deferring our imminent borrowing maturities, resetting a number of covenants and removing the risk of facility prepayments related to declining rig values we have established a more stable platform to pursue and conclude negotiations with our stakeholders.

“We are pleased with the support shown by our banking group and continue to make good progress on negotiating a broader package of measures intended to significantly improve liquidity and bridge us to a recovery in the sector.”

Seadrill also recently decided to sell its remaining stake of approximately 490 million shares in SapuraKencana, an oilfield services company based in Malaysia.