TrollDrilling gets holder support to amend 13¾% bonds; board balks

By Susanna Moon

Chicago, July 18 - TrollDrilling & Services Ltd. received bondholder approval to amend its 13¾% senior secured callable bonds due 2016 at a meeting held on July 17, but the company's board of directors rejected the terms as amended and the bond agreement remains unchanged.

Holders voted to pass the resolution, which was amended because the original proposal was subject to a firm contract for Troll Solution, either with a signed document from BP or a signed contract with Perenco, according to a notice from bond trustee Norsk Tillitmann ASA.

Because the company could not produce that documentation, it began a dialogue with holders of more than two-thirds of the notes to amend the notes.

Under the amended terms, the company pushed back the last installment date for repayment of the bonds to May 19, 2016 and increased the number of quarterly payments to 14 installments of $2.67 million each instead of semiannual installments of $4 million each.

Also, the minimum equity ratio under the note terms would go down to 25% from 30% from June 30 to Sept. 29, 2013.

Incidentally, there were enough holders to form a quorum, and the proposal obtained 94.23% of the votes.

In order for the measure to pass, at least half of the bonds needed to be represented in person or by proxy at the meeting, and at least two-thirds of those represented at the meeting needed to vote for it.

Background

The company's trustee previously said on July 2 that TrollDrilling was seeking bondholder approval to issue $20 million more of the 13¾% notes.

The company issued $60 million of the bonds in August 2011. The additional bonds would be issued at 92% of par.

The company was also seeking amendments to the bond agreement that include the postponement of the $4 million installment payment due Aug. 19. It was offering a 3% consent fee payable no later than Aug. 15.

Troll said the additional funding combined with the postponement of the installment would give it enough liquidity to finance the upgrade of its support rig Troll Solution and to provide working capital until the rig starts to generate revenue.

BP plc has signed a contract for use of the rig in the North Sea. If the rig is not installed by Dec. 31, the company will seek to sell it and repay the bonds with the proceeds. If the rig is sold by Dec. 31, 2013, the company will pay par; otherwise, it will pay 108% of par.

Amendments

Originally, the company had proposed repayment in 13 quarterly installments of $2.67 million each instead of semiannual installments of $4 million each, and each installment would be made at 108% of par.

The first installment date would be Feb. 19, 2013. The last installment date was originally pushed back to Feb. 19, 2016 from Feb. 19, 2015 under the proposal. If any installment payment would result in the amount of outstanding bonds dropping below $40 million, the payment will be reduced to an amount that will leave $40 million outstanding.

The amendments would postpone the call option period by one year. The bonds would be callable at 108% of par from August 2014 to August 2015.

Originally, the amendments would also reduce the minimum equity ratio to 25% from 30% for the 12 months that began June 30. It would then return to 30%.

The company previously said it had received confirmations from the holders of more than two-thirds of the bonds that they will vote in favor of the proposal.

The company's financial advisers are Fearnley Securities AS (47 22 93 63 66) and Pareto Securities AS (47 22 87 87 70).

The drilling service provider is based in Bergen, Norway.

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