Norwegian OSV giant Solstad Offshore is close to finalising a restructuring plan that will see it shed over 25% of its fleet, while converting Nkr10Bn (US$946M) of debt into equity, providing creditors with a 65 to 75% stake in the company
One of the largest OSV owners in the world, Oslo-listed Solstad Offshore, announced that a large majority of the stakeholders, including secured lenders, leasing companies, industrial shareholders and key bondholders have established a common plan to finalise negotiations on the basis of a ‘restructuring outline’. As such, the relevant stakeholders have confirmed their intention to work together to enter into a binding agreement based on the restructuring outline before the end of April 2020.
It has been a tough road for Solstad Offshore and its subsidiaries, which have worked with their creditors towards a consensual financial restructuring since Q3 2018. The announcement by Solstad Offshore follows closely upon the US-based OSV owner Hornbeck Offshore’s intention to file a pre-packaged restructuring plan under a Chapter 11 proceeding.
"Passing this milestone means we continue to operate Solstad Offshore ASA in a controlled manner in these challenging times, with predictability for our employees and clients worldwide,” said Solstad Offshore chief executive Lars Peder Solstad. “The discussions with the stakeholders are constructive and we look forward to working with the parties to agree the restructuring over the next weeks," added Mr Solstad.
Among the terms proposed for the restructuring are approximately Nkr10Bn (US$946M) of debt will be converted into equity with other secured debt included in a fleet loan maturing after four years. The Solstad SOFF 04 bonds will receive a fee of Nkr50M (US$4.7M) financed by new equity, and the residual claim will be converted to equity in the company. The bondholders in Solship Invest 1 AS will be repaid an amount equal to Solship Invest 1 AS corporate cash of approximately Nkr26M (US$2.5M). The residual claim will be converted to equity in the company.
With close to 130 vessels, Solstad Offshore will sell or scrap 37 older and less sophisticated vessels, leaving a core fleet of approximately 90 vessels. The average age of the Solstad Offshore fleet is 11 years, according to data compiled by VesselsValue. Some of its oldest vessels are anchor handling supply tugs, which were delivered in the late 1990s.
SFL Corporation will receive cash of Nkr10M (US$946,000), following the termination of leasing agreements for the five vessels owned by its subsidiaries.
The leasing agreements for two vessels owned by a subsidiary of Ocean Yield ASA, F-Shiplease AS, will be replaced by new lease agreements on amended terms. The charter rate payable under the new lease agreements shall be a reference rate equal to the average per vessel EBITDA in a pool of seven similar UT731 design vessels. F-Shiplease AS will carry all upside/downside from the operation of its vessels during the charter period.
Upon completion of the restructuring, the existing shares will represent 0.4%, and the converted debt will represent at least 65-75% of Solstad Offshore’s shares.
Existing industrial shareholders, Mr Solstad and companies controlled by him will have the opportunity to acquire shares equal to one-third ownership in the company upon completion of the restructuring. The shares to be subscribed by the industrial shareholders will be subject to a lock-up period.
The remaining shareholders will be offered to the opportunity to subscribe to shares equal to a total ownership of up to 2%. The total subscription amount for the shares in consideration for cash (to represent up to 35% of the shares of Solstad Offshore upon completion of the restructuring will be up to approximately Nkr70M (US$6.6M).
The components of the restructuring outline are subject to credit and internal approvals with the stakeholders.
"We are entering a period where global offshore activity is likely to be reduced with the impact of the Covid-19 virus and drop in the oil price,” said Mr Solstad. “A successful implementation of the restructuring will enable the company to better meet the challenges of the current markets and position the company well for the coming years."