Island Offshore reaches agreement with creditors and some - but not all - bondholdersYard News // March 4, 2016
Island Offshore in Norway says discussions with certain secured creditors to ease the repayment schedule on some of the group’s senior secured first lien credit facilities and amendment of certain financial covenants, that have been ongoing since July 2015, have reached fruition.
Subject to final documentation, the creditors have agreed to postponement of installments for 18 months and temporary adjustments to debt service coverage and gearing ratios in 2015, 2016 and 2017. Restrictions on dividend payments and capital expenditure will apply going forward. The conditions for the new arrangement include a new equity contribution or subordinated shareholder loans of NKr 100 million in addition to NKr 80 million already provided in December 2015.
Island Offshore says three of four newbuildings under construction at Vard Brevik will be owned and financed outside the group. Negotiations with the yard are ongoing with regard to the details in this agreement.
Island Offshore noted that, since early January 2016, the company and its advisers have been in discussions with the Nordic Trustee ASA and an ad-hoc group of bondholders in its Senior Unsecured Open Callable Bond Issue 2013/2016 that in aggregate beneficially own more than 40 per cent of the bonds, in order to seek consensus on the terms on which the bond agreement can be amended to allow for the implementation of the amendments to the credit facilities referred to above.
The company has now reached agreement with holders of in excess of two thirds of the bonds for a 30 month extension of the bonds’ maturity to 05 October 2018 and easements of financial covenants for 2015, 2016 and 2017.
There will be no change to the aggregate contractual interest accruing on the bonds, however, from the date of the implementation of the amendments the cash interest payable will be reduced.
The proposal also includes restrictions on contribution and loans from the company to other members of the group and repayment of long-term unsecured payment obligations.
The amendments to the bond agreement are expected to be formally approved by a bondholders’ meeting to be held on 16 March 2016.
Implementation of the amendments will be subject to a tender offer to acquire NKr 230 million of nominal value of the bonds being made by one or more external investors, as well as certain other customary conditions.
"From the company’s point of view, the above amendments to its financing facilities represent a fair and balanced solution given the current market conditions and other circumstances," said Island Offshore in its Fourth Quarter 2015 statement. "Implementation of such amendments is expected to enable the group to continue to service and repay its debt, and will significantly improve its financial condition. Thus, the amendments will allow the group to continue operations as a going concern and focus on a long term strategy that will create value for its stakeholders."