Polarcus’ lenders have taken control of its vessels and shipholding arm after it defaulted on loan and bond repayments, while struggling with growing debt
Polarcus had halted all payments of interest and amortisation to finance providers and was trying to gain extensions. But its lenders ran out of patience and took matters into their own hands.
After Polarcus defaulted on bank loans and bonds, lenders took over shares in subsidiaries owning the seismic vessels and replaced directors in each subsidiary.
Its fleet incorporates seven seismic vessels including two chartered to Russia’s Sovcomflot. Lenders now have control of Polarcus Asima, Polarcus Alima, Polarcus Amani, Polarcus Adira, Polarcus Nadia, Polarcus Naila and Polarcus Shipholding.
Despite this move, Polarcus has gained obligations from lenders that they do not wish to halt operations.
"The lenders have made it clear to the company that their intention is not to jeopardise or destabilise the Polarcus organisation," Polarcus said.
"The lenders have confirmed they are open to entering into a standstill period which will allow continued operations and awarded projects to be undertaken without disruption and discussions are underway in this regard."
Polarcus’ board of directors was forced to pursue available options with a view to ensuring the financial sustainability of the company when its lenders refused extension requests.
Polarcus’ financial challenges were driven mainly from the fallout from the global coronavirus pandemic and resulting slump in oil demand and what it called “sustained economic challenges globally”.
Energy companies scaled back oil and gas exploration including investment in offshore seismic surveys, impacting demand for Polarcus’ vessels.
Although Polarcus has an order backlog of US$130M, it is not able to convert this into debt repayments fast enough for its lenders.
“Polarcus has confirmed to the relevant finance parties a payment default under its working capital facility (WCF) agreement,” the company said. Polarcus had been in “detailed discussions with its bank lenders to explore financial solutions” its management said.
But the lenders would not extend financial obligations under Polarcus’ bank facilities any further than 25 January 2021. This included an obligation to clean down US$25M which had been drawn down from the company’s WCF.
“With the expiration of the previous clean down extension, an event of default has been triggered under the WCF,” said Polarcus, “and in turn, a cross-default of the group’s other bank facilities and of the convertible bond loan”.
"Polarcus remains committed to solving its long-term financing requirements in a manner which satisfies the lenders and other stakeholders’ requirements."
Polarcus had retained ABG Sundal Collier as financial advisor and Wiersholm and Walkers as legal advisors to assist its board to address the contemplated restructuring of the company’s balance sheet.
Its directors have taken several measures to improve the company’s financial situation during 2020, including restructuring its global organisation, streamlining its operating model and reducing its cost base. Polarcus said it has maintained market share “in an extremely challenging market” and achieves “a financial position where operations are cash positive before debt service”.
While restructuring negotiations continue, the board of directors will continue to take steps to manage the interests of all stakeholders and to operate normally in all other respects. In particular, trade creditors will continue to be paid in full and within current agreed payment periods and clients will continue to receive the high project performance standards.
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