Banks and bondholders are taking over at Norway's struggling Solstad Offshore as a $946m debt deal was agreed in principal.
The world's biggest owner of high-end offshore support vessels (OSVs) said the converted debt will constitute at least 65% to 75% of the equity if a final deal is signed before the end of this month.
The new owners of the company will then look to sell or scrap 37 ships to leave a core fleet of 90 units.
Solstad has been working to secure a vital refinancing deal with creditors since 2018, as it faced an ongoing liquidity crunch in the offshore downturn.
The company's current structure dates from 2017, when John Fredriksen's Deep Sea Supply and domestic owner Farstad Shipping were merged into Solstad in a deal involving tycoon Kjell Inge Rokke. Solstad had already taken over Rem Offshore, following a slump in the OSV market.
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 to the benefit of all stakeholders," it said.
"Passing this milestone means that we continue to operate Solstad Offshore in a controlled manner in these challenging times, with predictability for our employees and clients worldwide," said CEO Lars Peder Solstad.
"The discussions with the stakeholders are constructive and we look forward to work with the parties with a view to agree on the restructuring over the next weeks."
Shareholders can rebuild their positions
About NOK 10bn ($946m) of debt will be converted into equity.
Upon completion of the restructuring, the existing shares will represent 0.4%.
But "industrial shareholders" including Lars Peder Solstad and companies controlled by him will continue to support the company, and will be offered the chance to subscribe for shares so as to retain an ownership of up to 33% in Solstad.
Other shareholders will be offered a chance to buy 2%.
This will cost NOK 70m for the total 35% slice.
Rokke is the biggest shareholder currently with 35.61%, plus another 5% through his shipowning company Ocean Yield, with Fredriksen having 24.12% and the Solstad family 11.5%.
Shares take a hammering
The stock was trading down 20% on Wednesday in Oslo at NOK 0.40, giving it a market cap of just NOK 147.5m.
VesselsValue rates the fleet as worth $1.34bn, however.
The balance sheet and liquidity will be notably strengthened and the financial and company structure will be simplified, Solstad said.
Apart from certain ring-fenced structures, the surviving secured debt of the company will be included in a fleet loan maturing after four years.
Bondholders of the SOFF 04 bonds will receive a fee of NOK 50m financed by new equity, and the residual claim will be converted to equity in the company.
The company said the group's fleet will be "refocused", with 37 older and less sophisticated ships marked for sale or demolition.
Solstad is paying John Fredriksen's SFL Corp a cash fee of NOK 10m after both sides scrapped bareboat charter deals for five OSVs owned by SFL.
Ocean Yield deals rejigged
Leasing agreements for two anchor-handlers owned by a subsidiary of Ocean Yield, F-Shiplease, will be replaced by new deals on amended terms.
The charter rate payable will be equal to the average Ebitda per vessel in a pool of seven similar UT731 designs.
F-Shiplease will carry all upside/downside from the operation of its vessels during the charter period, Solstad said.
It added that one secured creditor to subsidiaries of Solship Invest 1 has not agreed to extend the current standstill period to 30 April.
And the current suspension period in SOFF 04 and a waiver period in the Solship Invest 1 bond expires this week, meaning the company is in breach of their terms on Wednesday.
"However key bondholders have already confirmed their support to the restructuring and have agreed to vote in favour of the solution contemplated by the restructuring outline provided that certain milestones are met," it said.
Better placed to meet challenges
Lars Peder Solstad added: "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.
"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."
Fearnley Securities said the restructuring "has moved a step in the right direction."
Ocean Yield has had a standstill agreement with the company since the fourth quarter of 2018 for the two ships chartered to Solstad.
"Since 2018 we have not assumed any earnings or value for these two vessels, and as a conservative measure, we will continue to do so," Fearnley said.
