Offshore drilling contractor Songa Offshore has launched a new refinancing package that will enable the company to take delivery of its fourth and final Cat D rig, the Songa Enabler, while the driller’s client Statoil has reduced the contract duration for two Cat D rigs already in operation.
Songa Offshore’s refinancing package includes the issuance of a new convertible bond and new equity, and the conversion of debt into equity.
The company intends to issue a subordinated convertible bond of $100m with an option to upsize to $125m, and complete a subsequent equity offering of up to $25m at NOK 0.15 per share, both as part of a comprehensive refinancing.
The proposed refinancing further includes a full conversion to equity of SONG06 (the existing convertible bond) in an amount of $150 million at NOK 0.176 per share, significant interest reductions, maturity extensions and other amendments to SONG04, SONG05 and the Perestroika shareholder loan, as well as amendments to the company’s secured debt facilities. The new convertible bond is partly underwritten by way of a $91.5m bridge financing (the bridge bond), which has been subscribed for in full by the largest stakeholders in the company.
The company said that the refinancing was supported by qualified majorities across all three bond series.
Songa stated that the bridge bond will immediately add needed liquidity and safeguard the operations of the company and the delivery of Sthe company’s final Cat D newbuild.
A liquidity shortfall, cured by the bridge bond and the subsequent refinancing, has arisen mainly due to the negative impact of the lower than anticipated initial utilisation of Songa Equinox and Songa Endurance, delayed rig deliveries, as well as cash deposit requirements in the bank financing related to Songa Encourage and Songa Enabler
The company’s third Cat D rig Songa Encourage has arrived in Norway and is expected to arrive in Bergen March 15, 2016 and start drilling operations in April 2016.
The delivery of Songa Enabler is expected to take place at the end of March and the rig is scheduled to start drilling operations in August 2016.
According to the drilling contractor, the refinancing will secure the start of all four long-term Cat D drilling contracts for Statoil and create a sustainable long term financial platform for the company.
Contract lengths slashed for two Cat D rigs
The Statoil drilling contracts stipulate that the client is entitled to shorten the duration of the drilling contracts by the same amount of time that the rigs have been delayed, relative to a pre-agreed delivery window.
In this respect, Songa Offshore has received notice that Statoil has exercised its contractual rights to reduce the contract lengths on the Songa Equinox by 347 days and on the Songa Endurance by 184 days. Songa Equinox and Songa Endurance started operating for Statoil at the beginning and end of December, respectively.
Songa Encourage and Songa Enabler are scheduled to start their drilling contracts in April 2016 and August 2016, each approximately four months after their respective pre-agreed delivery windows. The aggregate contract backlog for the four Cat D rigs is estimated to be in excess of 30.5 rig years or $5.1 bn as of February 28, 2016, excluding options.