Rig firm Seadrill risks Chapter 11 bankruptcy

Posted by Joseph Keefe

Seadrill faces debt-to-equity conversion; Chapter 11
beckons; billionaire John Fredriksen risks dilution of
stake.

Rig firm Seadrill, battling with $14 billion in debt and
liabilities, said on Tuesday it may have to file for Chapter 11
bankruptcy protection if it fails to reach a restructuring
agreement with its lenders, sending its shares down 14 percent.

Once the crown jewel in the empire of shipping tycoon John
Fredriksen, Oslo-listed Seadrill's shares have fallen 92 percent
in the past three years as plunging crude prices and drastic
spending cuts by oil companies hammered rig rates.

Seadrill's problems mirror those of another Fredriksen business,
tanker firm Frontline, which had to be rescued in 2012 after a
prolonged slump in rates by Hemen Holding, which manages his
holdings in the listed companies he controls.

The Norwegian-born billionaire announced plans on Tuesday to beef
up the tanker business and update its fleet while prices for
vessels are low to position it for an expected recovery in rates
from 2018.

But the scale of Seadrill's liabilities dwarf those of Frontline,
and the rig company said it would be challenging to find a "fully
consensual agreement" before an April 30 deadline. More than 40
banks are involved, in addition to bondholders.

"Feedback from certain stakeholders and potential new money
providers ... indicate that a comprehensive and consensual
agreement will likely require conversion of our bonds to equity,"
it said in a statement.

In a plan made public in January, Seadrill had said it aimed to
raise $1 billion in new capital, extend bank maturities, reduce
fixed amortisation and extend maturities of unsecured claims.

But the company has so far failed to reach a deal on these terms,
and Fredriksen, who holds a 23.6 percent stake in Frontline, now
risks diluting his shareholding.

"It is a bitter pill to swallow but they need to do it," said one
investor in Fredriksen companies, who declined to be named.

If it can't reach an agreement, Seadrill was preparing various
contingency plans, including potential schemes of arrangement or
Chapter 11 proceedings, the company said.

At 1203 GMT Seadrill shares were down 14 percent at 14.47
Norwegian crowns, while Frontline's stock was up 5.7 percent at
59.50 crowns.

Frontline said it had made a higher and final offer for rival DHT
Holdings, in which it holds a 16 percent stake, adding that the
bid was rejected. It also said it plans to buy two very large
crude carriers (VLCCs) for $77.5 each from South Korea's DSME.

Brokerage Pareto Securities said the deal demonstrated
Frontline's ability to take advantage of low asset prices during
a market downturn.

According to an estimate by business magazine Kapital, which
tracks the wealth of rich Norwegians, John Fredriksen, aged 72,
had a net worth of some 92 billion Norwegian crowns ($11 billion)
in 2016.

His two daughters have increasingly become involved in the
running of his businesses in recent years.

By Gwladys Fouche and Ole Petter Skonnord

Feb 28, 2017

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