Offshore drilling rig contractor Borr Drilling announced it has reached agreements in principle with its largest creditors, the Singaporean yards, to refinance and defer a combined $1.4 billion debt maturities and delivery instalments from 2023 to 2025.
The company, which last year warned of financial difficulties, had previously announced its intention to address its debt maturities and commitments currently due in 2023.
In return for these concessions, Borr has agreed to make cash repayments on the accrued costs and capitalized PIK interest owed to the yards during 2022 and 2023, in addition to what was agreed in the January 2021 amendments. These additional payments amount to $22.4 million at the completion of the amendment agreements for the deferral (including $6.5 million of amendment fee), expected to be in January 2022 and an additional $28.6 million payable later in 2022. It is also agreed that the payment of the remaining deferred yard costs and capitalized interest originally due in 2023 will be paid out during 2023 and 2024. In addition, regular payments of cash interest and capital costs for deferring deliveries will commence in 2023. The agreement in principle also contemplates applying a portion of future net equity offerings (approximately 35%) to repay amounts owed to the yards, first to be applied to the accrued and capitalized costs, and secondly to repay principal.
Both agreements are subject to the yards’ board approvals, expected in mid-January 2022, and the consent from the company’s other creditors.
The company expects to seek raising approximately $30 million in new equity to cover the incremental $22.4 million cash payments due to the shipyards at the completion of the agreements.
Based on the contracted backlog, expected roll-over of current contracts and additional contract awards through 2022, Borr Drilling expects to have at least 18 rigs operating mid 2022, generating a significantly higher level of Adjusted EBITDA compared to the $20 million reported in the third quarter 2021 with 13 rigs operating. The new debt structure with no scheduled debt amortization to the yards and reasonable interest cost level until 2025 secures a low cash break even for the company.
“Borr Drilling is very appreciative of the support received from its main creditors. It is a testament to the trust placed in Borr Drilling, and confidence in the recovery of the market we now see unfolding. With a very large portion of the debt now being deferred, strong operational performance on our 18 rigs contracted and the expected further improvements in Adjusted EBITDA, we are positioned to fully benefit from a recovery in the jack-up drilling market. We believe that the current transaction benefits all stake-holders, creating a long-term solution with upside for both debt and equity holders,” said CEO Patrick Schorn.
This agreement in principle with the yard, if approved, contemplates that Borr Drilling will refinance maturities of its Senior Secured Credit Facilities and Hayfin facilities and convertible bonds to mature in 2025 or later and if such refinancing is not complete by June 2022, the refinancing of maturities and delivery deferrals will revert to the current schedule. Borr Drilling said it will continue to engage with these lenders to find a solution to defer or refinance the remaining debt maturities currently due in 2023, giving the company a complete long-term financing solution.