Borr Drilling has completed its financial restructuring and made agreements with its lenders and shipyards, which will provide it with liquidity improvement of more than $315 million in the period to 1Q of 2022. As a result, Borr has postponed deliveries of five jack-up rigs until mid-2022.
As a result of the weakened market, Borr Drilling has been talking with the shipyards and creditors to create a liquidity runway until 2022 even in an unlikely low scenario without any further contracts.
In an update on Friday, Borr said it has obtained significant amendments to facilities from its secured lenders and shipyards that will provide total liquidity improvement of more than $315 million in the period to the first quarter of 2022.
The key terms of these amendments include deferral of the delivery of five newbuild jack-ups rigs until mid-2022, representing estimated liquidity improvement of approximately $190 million until the first quarter of 2022.
The terms also include deferral of certain interest payments until 2022, representing an estimated liquidity improvement of approximately $60 million and deferral of debt amortisation in 2021 of $65 million until maturity of the loans in the second quarter of 2022.
The amended terms also include the amendment of certain of the financial covenants, including reduction of the minimum liquidity covenant from 3% of net interest bearing debt, to $5 million with a gradual step-up to $20 million at 31 December 2021, which gives a liquidity improvement of up to $40 million in the period.
Thereafter the 3 per cent level will be reinstated. As part of the amendments, utilization of the remaining $30 million under the revolving credit facilities require all banks’ consent.
This also includes amending the minimum book equity ratio from 33.3 per cent to 25 per cent up to and including 31 December 2021. Thereafter the required ratio will be 40 per cent and suspension of the Debt Service Coverage Ratio covenant of 1.25x until 31 December 2021.
Another key term of the amendments agreed is waivers of certain covenants in Borr’s ring-fenced financing structure including incremental liquidity from restricted cash.
The amendments provide for payment of certain interest payments originally due at the end of the first quarter of 2020 which had been deferred with lender consent, as well as other amendments to the facilities.
Borr Chairman, Paal Kibsgaard , said: “We are extremely pleased with the support given to the company by all stakeholders. The amended financing package gives a required cash break-even bareboat contribution in 2021 at only around $20,000/day per rig based on just 12 rigs in operation.
“In addition, the company has six more rigs activated and available, which it only intends to bring back to work on cash flow accretive contracts. We are also encouraged by the already improving supply-demand outlook for oil, and optimistic that this will lead to a gradual improvement in jack-up drilling activity in the coming year. We furthermore continue to look at additional initiatives to improve liquidity”.
The agreements were conditional on the issuance of 46,153,846 new shares to the subscribers of the $30 million equity offering, which was also settled on Friday.