Sembmarine unit agrees to defer US$800m receivables from Borr Drilling for 2 years

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Sembmarine unit agrees to defer US$800m receivables from Borr Drilling for 2 years

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Article from Business Times

SEMBCORP Marine's (Sembmarine) wholly-owned subsidiary PPL Shipyard (PPLS) has agreed in principle to defer US$800 million in receivables from Borr Drilling for 2 years from 2023 to 2025, the marine and offshore engineering group announced on Tuesday (Dec 28).

In granting the deferment, the group said the industry outlook for jackup drilling activities has been improving and the operating performance of Borr Drilling has continued to improve in tandem.

The deferment will give Borr Drilling more time to leverage on the improving industry outlook to generate more operating cash flow to meet its debt service obligations and further strengthen its balance sheet, it pointed out.

The owed sum was from a sales agreement in October 2017, where Borr Drilling and its subsidiaries bought 9 of PPLS's Pacific Class 400 jackup drilling rigs at an aggregate consideration of about US$1.3 billion.

At that time, Borr Drilling made an upfront downpayment of about US$500 million, with the rest to be paid with interest at market rates within 5 years from the delivery dates of the rigs, which were between November 2017 and January 2019.

As such, the balance amount was scheduled to mature on May 1, 2023, and a majority of the interest payable was capitalised and also due in the first quarter of that year, Sembmarine said.

The latest agreement, which was made at Borr Drilling's request, would mean that the balance amount would mature only on May 1, 2025.

In extending the payment, Sembmarine said Borr Drilling has agreed to pay PPLS an extension fee, and also make earlier payments of part of the capitalised interest previously due in the first quarter of 2023.

The remaining capitalised interest will be repaid in quarterly instalments in 2023 and 2024, and interest will continue to accrue at market rates acceptable to PPLS, the group added.

Sembmarine, meanwhile, noted that the balance amount and all interest payable were secured by first priority mortgages over the 9 rigs and corporate guarantee from Borr Drilling, and they continue to be in force today.

It also said that 8 of 9 rigs delivered have secured contracts and are presently in operation.

Moving forward, Sembmarine pointed out that Borr Drilling has committed to refinance or otherwise extend the maturities of its other credit facilities and convertible bonds to 2025 or later.

If such refinancing or maturity extensions are not completed by June next year, the deferment will not proceed and the maturities will revert to the current due date of May 1, 2023, it said.

Sembmarine said the agreement with Borr Drilling is not expected to have a material impact on the net tangible assets or earnings per share of the company in FY2021.

Shares of Sembmarine closed flat at S$0.082 on Monday.
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