Norway's Havila Shipping has become the latest offshore support vessel (OSV) owner to unveil a refinancing deal as the only way to avoid bankruptcy.
The company said banks have agreed to the restructuring, as well as two thirds of bondholders.
The refinancing involves a new convertible loan from the controlling Saevik family that will see it maintain control of the shipping company, plus a potential repair issue of shares.
Debt maturity and some repayments will be pushed out until at least 2025.
"The restructuring agreements will contribute to maintaining a liquidity position of NOK 175m ($17m) throughout the duration of the agreement," it said.
"The company can make necessary vessel investments as part of its ordinary course of business," it added.
Major impact from pandemic
Havila said the downturn in the offshore market and the expected continuing fall in market values and activities within the shipping and offshore sector has, as for other players in the sector, had a major impact.
"The company has faced major financial challenges for the period 2015 to 2020, and it is anticipated that the downturn in the offshore market may continue also after this period," it added.
"The financial challenges have also become critical in the first quarter of 2020 as a result of the outbreak of the coronavirus."
This has led to considerable market uncertainty and pushed rates down in the OSV market, at the same time as the oil price has fallen significantly.
Its last refinancing deal was executed in February 2017 after a prolonged market slump, but it matures on 7 November 2020.
Tripartite agreement
Havila said it has been in talks with lenders and bondholders and has come up with three agreements.
The first refinances bank debt, while the other two relate to bonds. Additional bonds will be issued to settle interest owing.
Debt will be organised into two tranches. The first will see instalments and interest payable, while the other carries no interest and any outstanding amounts will be converted to equity at the start of 2025 or 2026.
Tranche A comprises NOK 3.1bn of vessel debt and NOK 112.2m of bonds, while tranche B is NOK 1.1bn of borrowings and NOK 56m of bonds.
In a worst case scenario NOK 3bn will be converted into Havila Shipping shares, or 47% of the company.
Lenders are Danske Bank, DNB, DVB, the Norwegian Export Credit Guarantee Agency, Nordea, Sparebank 1, Swedbank and Islandsbanki.
Outstanding debt was NOK 4.2bn at the start of the year.
Payment of interest and instalments will be limited by the respective profit of each ship.
For the entire fleet the interest bearing debt will be reduced by NOK 65m each quarter.
Havila is guaranteeing operational expenses and lay-up costs of ships for six and 18 months respectively.
Banks can take over vessels with insufficient income to meet operational costs, or provide new financing to cover these and stacking expenses.
Repair issue for investors
The company may also launch a repair issue after the five or six year runway period is over, for shareholders other than banks and bondholders.
"The board of directors is of the opinion that the restructuring plan negotiated with...creditors and bondholders appears to be the only available alternative for a successful restructuring of the company's debt and equity, and thereby the only possible way to save the company from bankruptcy proceedings."
In a market where capital is "scarce", the board said it was proposing a NOK 100m convertible loan to strengthen equity.
The Saevik family's Havila Holding will provide the cash if the restructuring goes through.
The idea is to secure an industrial owner for the company. Havila Holding will maintain its 50.96% stake as a result.
Other Norwegian OSV owners have been trying to deal with the worsening situation in the last few weeks.
Rash of refinancings
Dof is seeking emergency loans, while banks are taking over Solstad Offshore as part of a debt restructuring. Siem Offshore has delayed payments on $1bn of debt.
Havila runs 23 vessels from Fosnavag, including six for external owners.
The book value of the fleet was NOK 2.99bn towards the end of last year.
In December, it revealed its equity was NOK 962m negative as financial restructuring talks continued.
Havila began a new round of negotiations with its lenders a year ago after 12 of its vessels failed to pass a six-month stress test.
For the affected ships, interest payments were postponed for interest accrued until the "alternative" courses of action in the 2017 restructuring agreement were clarified or renegotiated.
These "alternative" strategies included lenders taking ownership of vessels and cancelling the related debt; or vessels may be sold.
