The existence of John Fredriksen’s drilling company Seadrill is being threatened by “an approaching iceberg of debt”, which will require rigorous refinancing within the next two years, a report from Nordea Bank says.
Seadrill has a funding gap of at least $2.5bn through to 2018, Nordea analyst Janne Kvernland said in the report, seen by Bloomberg.
The NYSE-listed company’s refinancing is likely include an equity issue of about $1bn, the report said. Seadrill’s market capitalisation was $965.88m when markets closed on Wednesday.
Kvernland said Seadrill will not be able to cover the repayment of the $948m principal on a senior, unsecured bond and bank loans of $1.2bn in 2017. Seadrill’s CEO Per Wullf told Bloomberg repayment of the bond due in September 2017 is “one of the main priorities for the company”.
The company should, however, be able to cover its interest and amortization payments from operations, the Nordea report stated.
The company is also likely to extend its loan maturities and reduce its debt amortisation, Nordea said. Drilling rig newbuildings are also expected to be delayed.
“Seadrill’s debt structure has been based on the assumption that the bull market would last,” said Kvernland, who called the market outlook for offshore drilling companies “abysmal”.