According to people familiar with the matter, John Fredriksen, Seadrill Ltd (NYSE:SDRL) founder and major shareholder, is willing to loan up to $1.20 billion to the company as part of a potential restructuring effort.
Restructuring Proposal
Per Wullf, Seadrill CEO, has recently noted that he seeks to restructure the company’s whopping net debt of roughly $9.10 billion by year-end. The proposed restructuring initiative could lead to the postponement of all bank maturities, steering the lenders within the company’s network away from losses.
Currently, less than 10 of Seadrill lenders are in talks regarding the proposal. Later on, it will be assessed by 42 Seadrill lenders and bondholders.
As of this writing, Fredriksen has a net worth of more than $10 billion, over half of which is in cash and the rest in assets.
Market Collapse
Seadrill and other industry players have long been suffering as oil prices have been continuously declining since 2014 due to an oil supply glut. Companies have already employed cost-cutting measures and suspended dividends.
Seadrill currently has the highest level of net debt among its competitors on a leverage basis. With a potential loan coming from Fredriksen and a restructuring plan underway, Janne Kverneland, a Nordea AB analyst, has implied that Seadrill might soon figure its way out the hole.
“It is hard to assess the valuation impact as the structure and terms of the capital injection is unknown, but we would see it as a positive if Seadrill is able to start to build a credible runway into 2020,” explained Kverneland.
Taking the purported loan from Fredriksen and the postponement of bond maturities in consideration, Kverneland has emphasized that the company will still require an equity injection of at least $1 billion two years from now in order to regain stability.
Prior to the collapse of the offshore drilling industry when the oil oversupply problem first emerged in 2014, Seadrill used to be the biggest industry player in terms of valuation. Since then, the stock has lost over 90%.
On Tuesday, Seadrill had ended the session at $2.66.