Borr Drilling has become the latest company operating in the oil and gas sector to complete a refinancing designed to improve liquidity and address financial pressures brought on by the continuing weakness in the sector. Headquartered in Norway, Borr owns and operates jack-up rigs providing drilling services to the oil and gas exploration and production industry in water depths up to approximately 400 feet.
Discussing the business and its outlook at the end of the third quarter in November 2020, the company told investors that it had the lowest number of rigs active since the beginning of the pandemic. They said it was the result of contract cancellations and suspensions caused by operators pushing out their anticipated work scope. Only 13 rigs were committed with 10 others available.
“The challenging business environment of the last years in combination with the COVID pandemic has been very difficult for the offshore drilling industry, causing several companies to file for bankruptcy protection and other forms of financial restructuring. All these actions will likely lead to significant consolidation in the future,” the company reported to investors. Borr raised capital in 2020 and was actively working to manage liquidity.
Despite their efforts, management had warned, “As a result of this difficult market environment, combined with payment delays in Mexico, a large amount of debt and significant newbuild obligations, the Company continues to face a very challenging financial situation in the fourth quarter and going into 2021.”
Under the new agreements supported by its creditors, maturity was deferred on $595 million in debt on the company’s bank facilities and a note from Hayfin, an. alternative asset management firm in addition to $760 million in facilities and deferring the majority of interest payments related to the company’s newbuild financing.
Other creditor agreements relate to the company’s newbuild commitments. Borr had contracts for the delivery of five rigs from shipyards by the third quarter of 2022. Working with Keppel they agreed to extend newbuild delivery facilities for three delivered rigs by one year (from five to six year financing) and deferring interest. The delivery dates for the five new rigs are also being extended with the first delivery in May 2023 and the final delivery in December 2023
“Borr Drilling is very thankful for the support received from its creditors. The liquidity improvement plan, which started mid-2020, including this recent financing plan, has contributed over USD 1 billion in total liquidity improvements until 2023 and improved our runway. We remain optimistic about the opportunities for Borr Drilling in the current market environment” says CEO Patrick Schorn
These terms have been approved by the credit committees of the syndicate banks and Hayfin. Also, the company has a signed term-sheet with the PPL shipyard in Singapore, and an agreement in principle with Keppel, subject to final board approval. The agreements are subject to conditions, including completion of a $40m equity raise. The company is working on definitive documentation to reflect these terms expected to be concluded shortly.
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