Sea Trucks reschedules meeting of 9% bondholders for Dec. 23

By Marisa Wong

Morgantown, W.Va., Dec. 9 – Sea Trucks Group Ltd. cancelled the Dec. 14 meeting set for holders of its 9% senior secured callable bonds, issue 2013/2018 and rescheduled the meeting for Dec. 23, according to notices from bond trustee Nordic Trustee ASA.

On Nov. 27 the company summoned the original meeting to seek bondholder approval of some amendments to the bonds.

The company wants to make changes to the bond agreement in order to be better prepared for expected volatility in earnings going forward. The amendments affect financial covenants, the repayment schedule, definitions and other terms and conditions.

Bondholders will vote on the proposed changes at the Dec. 23 meeting in Oslo.

To approve the proposal, holders of at least two-thirds of the bonds represented at the meeting must vote in favor of the resolution. In order to have a quorum, at least half of the bonds must be represented at the meeting.

The company said that holders of a majority of the voting bonds have indicated that they intend to support the proposal.

The company is offering a one-time amendment fee of 1%.

There is $571 million of the bonds outstanding.

Background

The company issued the 9% bonds in March 2013 to refinance existing debt, to finance capital expenditures and for general corporate purposes.

The bonds were initially secured against the company’s five DP3 offshore installation vessels as well as 26 other offshore vessels. Since the bonds’ issuance, another 13 newly built offshore vessels have been delivered and are in the process of being added to the security package.

In order to remove two small vessels from the security pool, during 2014 and the first quarter of 2015 the company repurchased and cancelled $4 million of the outstanding bonds.

Following a buyback offer in April 2015 and other partial repurchases in the market, the company held $103 million of the outstanding bonds as of June 30. That amount is unchanged as of Nov. 27. The company plans to cancel its holdings in full when the proposal becomes effective.

According to the notice, the company has been in compliance with the existing financial covenants under the bonds. The company said it considers its long-term prospects to be good, based on its relative position in the markets in which it operates, its modern DP3 fleet and the market-leading position of its conventional fleet in Nigeria.

However, the current offshore services market is significantly weaker than what was predicted at the time the bonds were issued, due largely to a weak oil price and reduction in capital expenditure by the company’s clients and their partners.

Further, following the election in Nigeria of a new president, the extended period of organizational change within the Nigerian government is expected to continue to cause delays to the award of projects in Sea Truck’s core market.

As a result, the company anticipates increased volatility in earnings going forward. The company has seen a reduction in its liquidity and expects to be more vulnerable to the interest coverage ratio and the asset cover ratio due to circumstances beyond its control. The fixed debt repayment schedule will also leave the company vulnerable to volatile earnings, the notice said.

In sum, the proposal includes, among other things, amendments to the interest coverage ratio, asset cover ratio, liquidity covenant, installments and definitions; the release or removal of certain vessels from the security pool; and amendments on restrictions.

Sea Trucks is based in Lagos, Nigeria, and provides marine services to oil and construction companies.

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