For the second time in 18 months, offshore drilling firm Borr Drilling reports that it has reached agreements with its creditors to refinance the business. The heavily indebted company announces that agreements in principle have been reached with most secured creditors to extend the majority of secured debt through 2025.
Borr has been struggling with high debt levels following a series of acquisitions, asset purchases and shipbuilding deals with Paragon, Transocean, Hercules, Keppel FELS and PPL Shipyard. Faced with maturities on its roughly $1.9 billion debt, Borr announced two weeks ago that it had agreed to a two-week covenant waiver with affected lenders in order to have more time. to agree on refinancing terms.
The new agreements in principle announced on July 14 provide for a partial repayment of the senior secured facility guaranteed by eight platforms, reducing it from $313 million to $250 million, of which $100 million is subject to syndication successful. If the company is successful in reducing this facility to $150 million drawn, then three of the rigs will be unencumbered assets that could be sold to reduce capital requirements. In addition, the tentative agreement contemplates a $30 million repayment of a credit facility from Hayfin.
These measures would be in addition to the company’s announcement in June of the sale of three platforms under construction. Borr said he received a binding letter of intent for all three ships. The company says it is also targeting the sale of an additional rig in the fourth quarter of 2022. Once asset sales are complete, Borr’s fleet would consist of 22 delivered rigs plus two additional rigs in construction.
Along with announcing the company’s tentative agreement on the terms of the refinancing, Borr also announced plans to launch a stock offering after reporting its second-quarter results on Aug. 11. Proceeds from the potential capital increase are expected to be used to partially repay certain secured facilities. The company is targeting an increase of up to $250 million in the offering, which could be reduced in the event of syndication of facilities, sales of additional assets or joint ventures. If the offer proceeds at the $250 million level, it would represent significant dilution for existing shareholders of the company, which has a market valuation to date of around $400 million.
Once completed, Borr said he would have approximately $1.4 billion in long-term funding, which would give him room to capitalize on market opportunities. They also noted that the proposed refinancing maintains long-term financing in the amount of $260 million on the two new builds. The company currently has five vessels under contract to Keppel FELS with the sales agreements for the three high specification units that were part of its Super B Bigfoot class. The three vessels for sale are each 246 feet long and can operate in waters with a maximum depth of 400 feet and a maximum drilling depth of 35,000 feet.
Borr told investors and analysts in May that market conditions were improving rapidly along the expected path. “The significant number of contracts awarded recently, combined with continued demand for additional drilling rigs, has set the offshore drilling industry on a strong growth trajectory,” said Patrick Schorn, CEO of the company. Citing usage levels, daily rates and contracts, he predicted that demand for modern rigs is likely to outstrip supply. He pointed out that jackup rigs under contract had returned to pre-COVID levels, predicting that new awards would bring the industry back to levels last seen in 2015.