Seadrill has reached a forbearance deal with some of its lenders that will see them avoid taking action for loan defaults for about a month.
The deal was struck just over two weeks after prior forbearance agreements expired and came as the John Fredriksen-backed rig and drillship owner works to hammer out a wider restructuring to claw its way out of the persistent offshore market slump.
Oslo-listed Seadrill said the deal with creditors covers nine of the cash-strapped company's 12 senior secured credit facilities.
"The purpose of the forbearance agreement is to allow the company and its stakeholders more time to finalise negotiations on the head terms of a comprehensive restructuring of its balance sheet," Seadrill said.
Under the deals, creditors agreed to eschew taking any actions that result from a default on the credit facilities until 29 January.
But the forbearance pacts provide only partial cover.
Three credit facilities are not included in the arrangement, and Seadrill's secured notes also have no such protections in place.
And a guarantee facility set up with Danske Bank is also outside the deals.
Also not covered by forbearance are Seadrill's leasing arrangements on three drilling units that are owned by SFL Corp, a New York-listed company in the Fredriksen group.
In all these cases, Seadrill said, the creditors have rights to either accelerate repayment or take other enforcement actions.
Payment pact in place
But SFL Corp chief executive Ole Hjertaker said his company still has an arrangement with Seadrill that covers partial payment on the drilling rig leases, even though a prior forbearance deal expired in mid-December.
"So there is no need to do the forbearance as such because we already have the economic arrangement in place," he told TradeWinds.
Seadrill has previously acknowledged that the eventual restructuring could involve a court supervised process, a tack that spin-off Seadrill Partners took when it filed for Chapter 11 bankruptcy protection in the US.
And Seadrill has warned that the effort could lead investors losing much or all of their shareholder value. The drilling contractor's largest shareholder is Fredriksen's Hemen Holding, which held a 27.2% stake at the time of Seadrill's last annual report.
"The company continues to evaluate capital structure proposals from its financial stakeholders," Seadrill said in its latest announcement.
"Whilst no agreement has been reached at this point, it is expected that potential solutions will lead to significant equitisation of debt which is likely to result in minimal or no recovery for current shareholders."
Seadrill's debt challenges have been a source of uncertainty for some time, with the company striking its first forbearance agreement in September.
Stakeholders are hoping that a rising outlook for the offshore sector will bolster Seadrill's ability to reach a broader restructuring deal.
"I hope that 2021 will be the year when we get it sorted and lift the cloud of uncertainty," SFL's Hjertaker said.
