SembMarine reaches deal to defer receivables from Borr Drilling

Singapore five-dollar note Photo by Leslie Shaffer

Sembcorp Marine‘s wholly owned subsidiary PPL Shipyard, or PPLS, has reached a deal to defer receivables from Borr Drilling to 2025 from 2023, the rig builder said in a filing to SGX Tuesday.

“The industry outlook for jackup drilling activities has been improving and the operating performance of Borr Drilling has continued to improve in tandem,” SembMarine said in the statement.

“The company is supportive of giving Borr Drilling more time to leverage on the improving industry outlook to generate more operating cash flow to meet its debt service obligations and further strengthen its balance sheet,” it added.

Borr Drilling had entered agreements in 2017 to buy nine Pacific Class 400 jackup drilling rigs from PPLS for around US$1.3 billion, making an upfront payment of around US$500 million, the filing said, adding the balance, plus interest, was to be paid within five years of the rigs’ delivery dates.

The principal and interest were secured by first priority mortgages on the rigs and a corporate guarantee from Borr Drilling, SembMarine said.

All nine rigs were delivered between November 2017 and January 2019, and eight of the nine are currently have contracts, the filing said.

The balance amount was due on 1 May 2023, and a majority of the interest was due in the first quarter of 2023, but SembMarine has made an in-principle agreement to defer the balance by 24 months, to 1 May 2025, the company said. Part of the capitalized interest due in the first quarter of 2023 will be paid earlier and Borr Drilling will pay an extension fee, SembMarine said.

The remaining capitalized interest will be paid in quarterly installments in 2023 and 2024, and interest will continue to accrue at market rates, SembMarine said.

SembMarine said the deal is conditional on Borr Drilling refinancing or extending the maturities of its other credit facilities and convertible bonds to 2025 or later, with a deadline of June 2022.