SFL Announces Forbearance Agreements With Seadrill
SFL Corporation Ltd.announces that it has entered into forbearance agreements with Seadrill Limited (“Seadrill”) in respect of the leasing arrangements on its three drilling rigs and the corresponding financing agreements. Unless extended or terminated, these forbearance agreements will last until December 14, 2020 (the “forbearance period”).
In addition, Seadrill has also announced that it has agreed to renew its forbearance agreements with certain other creditors in respect of its senior secured credit facility agreements, senior secured notes, and its guarantee facility agreement, in order to allow more time to negotiate a comprehensive restructuring of its balance sheet. Seadrill has advised that such a restructuring may involve the use of a court-supervised insolvency process.
While the discussions with Seadrill and its stakeholders are ongoing, the harsh environment jack-up rig West Linus and the harsh environment semi-submersible rig West Hercules remain on their respective drilling-contracts from Seadrill to oil majors in the North Sea. The semi-submersible rig West Taurus has been held in layup by the lessee for more than five years.
As previously publicly announced, Seadrill’s failure to pay hire under the leases for our three drilling rigs when due in October and November constituted an event of default under such leases and the related financing agreements. Unless cured or waived, an event of default under the lease agreements or the related financing agreements could result in enforcement by us or the applicable secured lenders (as applicable). In order to reduce the risk of such a scenario, SFL has entered into forbearance agreements with these lenders on the same terms as Seadrill’s forbearance agreements with these lenders.
During the forbearance period, Seadrill will be allowed to use certain funds received from the charterers of certain rigs to pay operating expenses for such rigs, from October until the end of the forbearance period. In exchange, SFL will receive approximately 67 – 70% of the existing contracted lease hire related to the West Hercules and the West Linus, respectively, for the same period. This is essentially equivalent to the interest and amortization due on the secured bank loan facilities relating to these rigs. Any excess hire paid under the above referenced leases will remain in Seadrill’s earnings accounts pledged to SFL.
While no assurances can be provided with regards to the outcome of the Seadrill restructuring, SFL continues to have constructive dialogue with Seadrill and the relevant financing banks to find a long-term solution.
Source: SFL Corporation