1) Skeie Drilling & Production (SKDP) may seek company liquidation if no agreement with its bondholders were reached by 4 June 2009.
According to SKDP yesterday, there was to-date no agreement with a group of its secured bondholders on its financial and rig construction re-structuring proposal. Further negotiations have not been fruitful, with the bondholders' counter proposals rejected.
As a recap, SKDP's re-structuring proposal (initiated on 17 April 2009) has expired on 31 May 2009, including the possibility of extending the delivery schedule for rig construction contracts with Keppel Corp (KEP), and the underwritting commitment from SKDP's main shareholder, Skeie Technology and Wideluck, for possible US$85m equity fund raising.
2) SKDP is now behind its progressive payment schedule for Rig 1 (with US$37m milestone payment due on 31 May), and may miss the US$40m payment for Rig 3 on 4 June.
For Rig 2, SKDP's inability to raise US$18m of new equity by end May implies a breach under the Prodjack 1 bond loan agreement, as the jackup rig is still without a charter contract. Collectively, SKDP may also risk the termination of US$675m in bank loan commitment to finance the three rig construction with KEP, if the contractual breaches for these projects are not resolved.
3) SKDP's Board of Directors now believes SKDP is insolvent, and could be illiquid if no re-structuring agreement could be reached.
As a last step to avoid its filing for bankruptcy, SKDP's Board of Directors will now seek "irrevocable pre-acceptances from a qualifying majority (2/3) of the three SKDP secured bond loans and the convertible loan to the proposal as set out in the SKDP announcement dated April 17 and as described in the SKDP Company Presentation dated April 17 posted on the company's web-page www.skeiedrilling.com".
If these conditions can be met by 4 June 2009, and pending a follow-up formal votes from all bondholders, SKDP will then seek extensions to the agreements with its main shareholder and KEP as per the re-structuring proposal on 17 April.
4) SKDP is one of KEP’s top 3 customers.
SKDP currently has construction contracts for three N-Class Jackup offshore drilling rigs with Keppel FELS shipyard in Singapore. We estimate that the contracted value for the three orders were S$1.7b, with an estimated S$0.8-1.0b worth of contracts yet to be recognised (or 8-11% of KEP's current order book).
While there is a lack of information on the actual cash collected to-date by KEP for these three SKDP orders, we believe that the possibility for KEP to complete construction of the three rigs on its own is not high in the event of a default by SKDP, unless the total cash collected to-date is more than 50% of combined contract value. Maintain FULLY VALUED on KEP. Our fair value for KEP stays at S$5.13.
Click here for more Offshore Marine Stocks Technical Analysis
Sponsored Links
Comments
No response to “Keppel Corp: Skeie Drilling and Production may face difficulties in paying for its three jackup rigs under construction”
Post Comments (Atom)
Post a Comment |
Post a Comment