Norway’s Seadrill warns of share, bond wipe-out in restructuring

By Ole Petter Skonnord and Terje Solsvik, Reuters - April 5, 2017

OSLO — Rig firm Seadrill warned on Tuesday that its stock will lose almost all of its value and its bonds will be hit as the Norwegian company prepares for potential bankruptcy proceedings to restructure $14 billion in debt and liabilities.

Shares in Seadrill, which was once the crown jewel in shipping tycoon John Fredriksen’s empire, have fallen 95 percent in the past three years as low oil prices prompted drastic spending cuts by energy companies, hammering rig rates.

Seadrill, which first warned in February that Chapter 11 bankruptcy protection was a risk, said in a statement that its banks and other lenders had agreed to extend restructuring talks by three months to July 31.

The company is negotiating with more than 40 banks, including Norway‘s DNB, Sweden’s Nordea and Denmark’s Danske Bank, as well as with bondholders and several rig-building yards.

Seadrill drilling rig West Sirius at Port Aransas, Texas. (Roy Luck / CC via Wikimedia Commons)
Seadrill drilling rig West Sirius at Port Aransas, Texas. (Roy Luck / CC via Wikimedia Commons)

Seadrill said extending the deadline of the talks will allow additional time to negotiate with banks as well as potential new investors, but the outlook is grim for shareholders.

“We currently believe that a comprehensive restructuring plan will require a substantial impairment or conversion of our bonds, as well as impairment, losses or substantial dilution for other stakeholders,” Seadrill said.

“As a result, the company currently expects that shareholders are likely to receive minimal recovery for their existing shares … We expect the implementation of a comprehensive restructuring plan will likely involve schemes of arrangement or Chapter 11 proceedings, and we are preparing accordingly,” it added.

Seadrill Chief Executive Per Wullf told Reuters that Fredriksen, the firm’s chairman and top shareholder with a 23.6 percent stake, is still involved in the restructuring talks,

“They are still part of it,” Wullf said, referring to Fredriksen and his family holding company Hemen, which owns multi-billion dollar stakes in industries ranging from fish farming to oil tankers and real estate.

The CEO declined to say whether Hemen or Fredriksen were prepared to inject cash as part of the restructuring.

“I can’t say anything more about that now. We’re in the middle of negotiations,” Wullf said.

Harald Thorstein, a close collaborator of Fredriksen, declined to comment.

One analyst said it was now likely the debt restructuring would involve legal proceedings. “We expect this deal will probably have to involve some court process,” said Thomas Larsen, an analyst at brokerage DNB Markets.

Additional reporting by Gwladys Fouche.