Songa Offshore announces debt restructuring; summons bondholders to approve amendments

Songa Offshore, the Cyprus-based offshore driller has announced plans to restructure its finances by offering a convertible bond of USD 100m with an option to upsize to USD 125m, raising fresh equity of up to USD 25m at NOK 0.15 per share, and amending the terms and conditions of existing bonds and loans. Further, the proposed refinancing includes a full conversion of the existing USD 150m convertible bond SONG06 to equity at NOK 0.176 per share. The plan also includes significant interest reductions, maturity extensions, covenant relief through 2Q18 and other amendments to SONG04, SONG05 and the Perestroika shareholder loan, as well as amendments to the company’s secured debt facilities. On 22 March 2016, the company has summoned bondholder’s meeting to be scheduled on 11 April 2016 to approve amendments. (For details refer refinancing term sheet)

USD 91.5m bridge bond: On 17 March 2016, the company announced a drawdown on the bridge bond of USD 91.5m, which will later be converted into the previously announced new convertible bond following the required resolutions by an extraordinary general meeting (EGM).  As mentioned in the company’s 4Q15 report, a liquidity gap had arisen due to lower than anticipated initial utilisation of Songa Equinox and Songa Endurance, delayed rig deliveries, and cash deposit requirements in the bank financing related to Songa Encourage and Songa Enabler.

Songa confident of gaining approval: The refinancing is subject to approval by sufficient majorities in the EGM and the respective bondholders′ meetings. The company stated that it has received irrevocable undertakings to vote in-favour of the proposed refinancing amounting to 71%, 72%, and 78% of the voting bonds in SONG04, SONG05, and SONG06 respectively. In addition, the company′s majority shareholder, Perestroika AS, and certain other shareholders, have confirmed that they will vote in favour of the required resolutions at the EGM.  The holders of shares and bonds issued by the company are likely to approve the restructuring as the entire offshore industry is struggling and can atleast recover their money when the market turns. While, rejecting the proposal could risk the future of the company resulting to significant losses to the holders.



Fleet Status: Songa Equinox and Songa Endurance were delivered from DSME on 30 Jun 2015 and 24 Aug 2015 and commenced operations for Statoil on Troll field from 7 Dec 2015 and 31 Dec 2015, respectively. As reported by the company in its latest fleet status report dated 21 March 2016, both the rigs operated with an earnings efficiency of 98% for the last three weeks. Further, Songa Encourage is expected to arrive in Bergen on 15 March 2016 and commence drilling operations in April 2016. The delivery of Songa Enabler is expected to take place end of March and the rig is scheduled to commence drilling operations in August 2016 for Statoil. Songa Dee and Songa Delta are also contracted for Statoil until 3Q16 while Songa Trym is currently idle and is being marketed. All in all, the company has long term contracts with Statoil for four out of seven rigs and two rigs will be off contract after 3Q16, while, Songa Trym is warm stacked. Although, the company poses a high risk of customer concentration it has a strong order backlog of USD 5.9bn through firm contracts and USD 8.3bn in options.


 Cat D Arbitration Case with DSME: Previously in July and November 2015, Songa had received arbitration notices regarding cost overruns in respect of the construction contracts for the CAT D rigs from DSME. In this regards, on 18 March 2016, Songa Offshore submitted its defence in the arbitrations and submitted counterclaims in respect of the rigs for the aggregate amount of USD 65.8m. The company further stated that DSME is solely responsible for the delays to the rigs and any attempt by DSME to recover cost overruns has no merit due to the turn-key nature of the construction contracts.

 FY15 results: Full year 2015 saw a modest rise of 3.8% YoY in revenue to USD 513m due to Songa Trym contract cancellation fee of USD 41.1m and revenue contribution from Songa Equinox from 7 Dec 2015.The company has closed offices in South Korea and Scotland, and plans to reduce 200 onshore jobs as part of its corporate restructuring program in light of depressed offshore drilling market, owing to falling crude prices. The company plans shift the support function from the offices in South Korea and Scotland to Norway, while the job cuts will save the around USD 30m annually.  Further, the management also plans to rightsize operating and staff organisations in Cyprus and Norway. FY15 adjusted EBITDA increased 43% YoY to USD 281m with corresponding margin increasing to 54.8% vs 39.7% last year. Operating cash flow in FY15 increased 240% YoY to USD 144m versus USD 42m last year largely due to aforementioned increase in adjusted EBITDA. However, humongous capital sending on the new builds delivery of USD 1.6bn resulted to a negative free cash of USD 1.5bn in FY15. Net debt increased to USD 2.2bn compared to USD 771m at end-FY14. As a result net leverage doubled to 7.91x vs 3.92x at end-FY14.

In conclusion: Songa offshore which is currently under a transformation phase should benefit from the proposed restructuring as it will cure the company’s liquidity needs and safeguard smooth operations of its drilling contracts for Statoil and will provide medium term stability by uniquely positioning  Songa Offshore compared to its peer contractors through the current market downturn.


(Source: Songa Offshore; rsquaredanalytics)

Near term debt maturities and high interest cost may force Cenveo for debt restructuring to avoid bankruptcy.

Cenveo Inc. (NYSE: CVO) is a Stamford, US based diversified manufacturer of print related products like envelope converting, commercial printing, and labels.  As of 31 December 2015, the company operated three reportable segments: envelope, print and label.

Total debt stood at USD 1.21bn at the end of 2015, out of which USD 427m matures in the next 12 to18 months. Thus in order to reduce rising debt burden, on 19 January 2016 the company sold its sole profit making Packaging Business to ‘WestRock Converting’ for USD 105m. The Net proceeds received from the sale were used to repay debt, as a result pro-forma total debt decreased to USD 1.1bn. Furthermore company’s total liquidity amounted to USD 132.1m, including USD 7.79m cash and USD 124.3m availability under its revolver, which is not enough to meet its near term debt (bond and ABL revolver) maturities. As of 2015, Company was in compliance with minimum fixed charge coverage ratio of 1.0x in relations to its covenants of its credit agreement. Given the above situation, on February 2016 Moody’s investors service downgrade Cenveo’s corporate family rating and probability default rating to caa2 from caa1 and caa2-PD from caa1-PD, respectively.


In regards to its ABL Facility, the company may elect to extend the maturity date of the ABL Facility to April 2018 if prior to 14 January 2017, the company has  purchased, redeemed, defeased or otherwise refinanced the 11.5% Notes, such that no more than USD 10m remaining outstanding.

graphFor FY15, Cenveo’s revenue decreased by USD 19.5m (1.1% down on YoY) to USD 1.74bn in 2015 due to lower sales from its envelope and label segment. The company has guided 2016 sales close to USD 1.7bn.  However adj. EBITDA improved 13.3% YoY to USD 158m in FY15 driven by cost reduction initiatives. Going forward for FY16 the company anticipates adj. EBITDA in the range of USD 155m to USD 160m, which would imply an adj. EBITDA margin of approximately 9.4%. On the basis of this guidance, net leverage could be in the range of 6.5x to 7.0x for 2016.


The above improvement in adj. EBITDA coupled with reduction in CAPEX spend and lower interest expense reduced FCF cash burn to negative USD 95m in FY15 from negative USD 115m in FY14. For 2015 aforementioned CAPEX and Interest expenses reduced 19.8% YoY and 6% YoY respectively. Moreover interest expense reduced on account of prior mentioned debt repayment.

NYSE compliance:

  • On 19 January 2016, a notice received from NYSE required Cenveo to maintain a average closing price of its common stock to be at least USD 1.00 per share for 30 consecutive days. The company had 180 days from the date of the notice to regain compliance.
  • Following this on 11 February 2016, Cenveo received a follow-on notice from NYSE, as the company had failed to maintain a minimum market capitalization of USD 50m for 30 consecutive trading days. The company had 180 days from the date of the notice to regain compliance.

Going forward, in absence of any further asset disposal, comings months look challenging as high interest payments are likely to run quickly through the company’s razor thin liquidity position.



Kenya – Well Update

16 March 2016 – Tullow Oil plc (Tullow) announces that the Cheptuket-1 well in Block 12A, Northern Kenya, has encountered good oil shows, seen in cuttings and rotary sidewall cores, across an interval of over 700 metres. Cheptuket-1 is the first well to test the Kerio Valley Basin and was drilled by the PR Marriott Rig-46 to a final depth of 3,083 metres.

The objective of the well was to establish a working petroleum system and test a structural closure in the south-western part of the basin. The strong oil shows encountered in Cheptuket-1 indicate the presence of an active petroleum system with significant oil generation. Post-well analysis is in progress ahead of defining the future exploration programme in the basin. As previously advised, the PR Marriott Rig-46 will now be demobilised. On the back of the encouraging Cheptuket-1 and successful Etom-2 results further exploration activities are being evaluated.

Tullow operates Block 12A with 40% equity and is partnered by Delonex Energy with 40% and Africa Oil Corporation with 20%.

Angus McCoss, Exploration Director, commented today:

“This is the most significant well result to date in Kenya outside the South Lokichar basin. Encountering strong oil shows across such a large interval is very encouraging indeed. I am delighted by this wildcat well result and the team are already working on our follow-up exploration plans for the Kerio Valley Basin”

(Source: Tullow Oil press release: )

Fiat Chrysler Automobiles sales in Europe for February 2016

In February, FCA posted a 22.4% year-over-year increase in European sales, compared with 14.0% for the industry. As a result, FCA’s ranking improved to fourth overall in Europe, with market share up 50 basis points to 7.4%. All FCA brands registered increases, with Fiat up 24.4%, Jeep up 23.9%, Lancia up 15.9% and Alfa Romeo up 8.6%. The Fiat Panda and 500 were the two best selling cars in the European A segment (accounting for a combined 32.0% share) and the 500L led its segment with a 29.3% share. The Fiat 500X and Jeep Renegade both continue as two of the most popular vehicles in the Small SUV segment. The new Fiat Tipo (already among the top 5 in its segment in Italy) continued to gain momentum with more than 22,000 orders already received. The brand is also preparing for the launch of the station wagon and 5-door versions of the Tipo.

FCA closed February with another strong monthly performance in Europe (EU28+EFTA). Group sales totaled nearly 81,000 units, a year-over-year increase of 22.4% compared with an industry average of 14.0%. Market share improved 50 basis points to 7.4%, bringing FCA’s European ranking to fourth overall. For the two months year-to-date, FCA posted unit sales of nearly 154,000 vehicles, an increase of 18.5% (+10.1% for the industry), with market share 50 basis points higher at 7.0%. In February, the Group posted double-digit growth in Italy (+32.1% vs industry increase of 27.3%) and France (+16.1% vs industry increase of 13.0%). Sales were also higher in the UK (+8.2%), Spain (+5.6%) and Germany (+2.2%).

Fiat brand posted European sales of nearly 61,000 vehicles for the month (+24.4%), marking the 28th consecutive month of year-over-year sales increases. Market share was 50 basis points higher at 5.6%, representing the best February result since 2011. Year-to-date, brand sales were up 19.3% to nearly 115,000 vehicles, with market share 50 basis points higher at 5.3%. The brand posted a particularly strong performance in Italy, with sales up 33.8%, in addition to posting increases in all other major European markets. February sales were up 5.4% in Germany, 24.5% in France, 2.1% in the UK and 12.2% in Spain. The Panda and 500 remained undisputed leaders in the A segment with a combined share of 32.0%. The Panda was overall leader with 18,800 units sold (+35.1%) followed by the 500 with nearly 13,600 units sold (+1.2%). The 500L continued as leader in the Small MPV segment (29.3% share) with 7,800 units sold. The 500X continued as one of the best selling vehicles in the Small SUV segment. The model ranked first in Italy (29.1% segment share), in the top five in France and Belgium and fourth in Europe overall (9.0% share). With more than 22,000 orders received, the new Fiat Tipo is already among the top sellers in its segment in Italy. Demand for the Tipo is expected to strengthen further with the arrival of the station wagon and 5-door versions.

Lancia/Chrysler posted February sales of nearly 6,900 vehicles, representing a 15.9% year-over-year increase. Share was in line with the prior year at 0.6%. For the year-to-date, sales were up 9.2% to 12,600 vehicles and market share was 0.6%. The brand posted a particularly strong result in Italy in February with sales climbing 30.0% year-over-year. For the Ypsilon, sales were up 20.7% over the same month one year ago.

Alfa Romeo posted February sales of 5,100 vehicles (+8.6% year-over-year) and share was 0.5%. Year-to-date, brand sales totaled nearly 9,700 units (+11.1%) and market share was stable at 0.4%. The brand posted positive results in the UK and Belgium with respective sales increases of 34.1% and 35.4%. For the Giulietta, sales were up 13.7% in February and 19.2% for the year-to-date.

Jeep posted February sales of nearly 7,900 vehicles, representing a 23.9% year-over-year increase and the brand’s 28th consecutive monthly sales increase in Europe. Market share was in line with the prior year at 0.7%. Year-to-date, brand sales were up 28.2% to more than 15,700 vehicles. Market share for the period was 10 basis points higher at 0.7%. February sales were up 47.7% in Italy, 29.6% in France and 76.0% in the UK and the brand posted its all-time best monthly performance in Italy and Belgium. Results were particularly positive for the Renegade – now well established as one of the leaders in the Small SUV segment – which posted a 44.3% year-over-year increase. The Grand Cherokee also posted a strong February performance, with sales up 18.2%.

For Maserati, the Group’s luxury brand, European sales totaled 372 vehicles in February and 810 for the year-to-date.

(Source: Fiat Chrysler Automobiles N.V. press release: )

FCA US Amends and Partially Prepays Term Loans

15 March 2016: Fiat Chrysler Automobiles N.V. (“FCA“) (NYSE: FCAU/MTA: FCA) announced today that its subsidiary FCA US LLC (“FCA US”) has entered into amendments to its Term Loan maturing in 2017 and its Term Loan maturing in 2018 (collectively, the “Amendments”) to eliminate covenants restricting the provision of guarantees and payment of dividends by FCA US for the benefit of the rest of the FCA Group.

The Amendments represent the final step toward allowing the free flow of capital among members of the FCA Group, as previously announced, and enabling access to the second €2.5 billion tranche of FCA’s €5 billion syndicated revolving credit facility.

As a condition to effectiveness of the Amendments, FCA US made a $2 billion voluntary prepayment, applied to the Term Loans in proportion to their respective principal balances. After giving effect to the prepayment, the aggregate outstanding principal balance of the Term Loans is approximately $2.8 billion.

(Source: Fiat Chrysler Automobiles N.V. Press release: )

Weir Plc’s 38.7% YoY drop in EBITDA elevates net leverage to 2.5x

Weir Group Plc, the United Kingdom based designer and manufacturer of high-end engineering products and services in FY15 reported 21.3% YoY decline in its revenue to GBP 1.98bn, as order input declined across all its segments.  During the period overall order input were down 24.3% YoY to GBP 1.87bn; with cuts seen in its oil and gas segment which was down 48% YoY, while the power and industrial, and minerals segment reported a decline of 11% YoY and 9% YoY respectively. Following this company stated EBITDA dropped 38.7% YoY to GBP 330m, which pushed net leverage up to 2.5x in FY15 as compared to 1.6x in FY14. Giving the weak trading conditions and deteriorating financial matrices, Moody’s on 29 February 2016 downgraded Weir to Baa3 from Baa1 with outlook negative.

Covenant summary:

  • Net debt/EBITDA < 3.5x (Actual FY15: 2.5x; FY14: 1.6x; FY13:1.5x) FY6 net debt/EBITDA in-line with FY15 is based on the following assumptions: dividend payout same as FY15, successful asset disposal of GBP 100m.
  • Interest cover >3.5x (Actual FY15: 7.3x; FY14: 12x; FY13:10.4x)

OCF reduced 40.5% YoY to GBP 309m due aforementioned decline in EBITDA. As a result of this FCF declined 48.5% YoY to GBP 180m, which was despite 14.7% YoY deduction in capex spend. Management has guided capex for FY16 to be capped at c.GBP 65m.

During the period total liquidity comprised of cash and cash equivalent which stood at GBP 184m. In addition to this Weir also had access to GBP 800m in revolving credit facilities; however the company has not disclosed the actual availability under the RCF. The company has no significant debt maturing until 2018 and 2019.




2016 Outlook:

  • The Company expect further decline in capital expenditure from its customers across all its segments, with revenue in its minerals and, oil and gas segment expected to decline slightly on a constant currency basis, while likely to remain flat in its power and industrial segment. Moreover margins may be supported through the a GBP 40m in identified cost-saving, which are in addition to GBP 45m (c. GBP 25m expected in FY16) due to the cost-saving activities done in FY15.
  • Weir expects to realize GBP 100m through disposal of non-core assets.
  • Capped CAPEX at c. GBP 65m (1.0x depreciation)


Slump in global oil price forced Denbury to amend its credit agreement prior to the annual scheduled redetermination.

Denbury Resources Inc (DNR: NYSE) is Texas, US Based independent oil and natural gas company with 288.6 MMBOE of proved oil and natural gas reserves, with operations in the Rocky Mountain and Gulf Coast regions of North America.

Covenant Summary – On 17 February 2016, DNR entered into second amendment to its credit agreement before its annual scheduled redetermination, which was to take place on May 2016.Under the amendment, lenders agreed to increase senior secured leverage covenant to 3.0 x from 2.5x, previously and decrease minimum interest coverage to 1.25x from 2.25x, till 2017, which gives the company a bit of room to be in compliance with the covenants.  On the other hand, total commitments under the revolver reduced to USD 1.5bn from USD 1.6bn. Additionally, applicable margins increased by 75bps which now ranges from 2% to 3%. As of 23 February 2016, the company had USD 3.3bn outstanding debt against USD 1.3bn total liquidity comprising USD 2.8m cash and USD 1.3bn available under its revolver. Consequently, on 3 February 2016, Moody’s Investors Service downgraded Denbury’s corporate family rating to ‘Caa2’ from ‘Ba3’ and senior subordinated notes to Caa3 from B1 with outlook negative.

Cap structure

Top Line- Over the recent past oil and exploration industry has witnessed significant downturn due to declining oil prices and high inventory level. In 4Q14 oil prices further declined dramatically below USD 27 per Bbl in January 2016 from USD 94per Bbl 2014, the lowest recorded over last 10 year. As a result Denbury’s average realized oil price, excluding derivative contracts was down to USD 47.30 per Bbl in 2015 from USD 90.74 per Bbl in 2014. Following this, DNR’s total revenue plunged 48% year-over-year (YoY) to USD 1.26bn in 2015 as compared to USD 2.43bn in FY14.

Production Overview- in FY15Denbury’s average production was down 2% YoY to 72,861 BOE/d (including tertiary production of 41,602 Bbls/d and non-tertiary production of 31,259 BOE/d), mainly due to decline in production of mature tertiary properties in the Gulf Coast region. Additionally, in late 2015, DNR decided to shut incremental production of 1000 BOE/d due to economic reasons. DNR anticipates 2016 production to be in the range of 64,000 BOE/d- 68,000 BOE/d, down 7% from 2015 levels. Further,the company entered into additional hedges to save itself from current slump in oil pricing, which covers a total of 36,000 Bbl/d for 1Q16, 34,000 Bbl/d for 2Q16, 24,000 Bbl/s for 3Q16, 30,000 Bbl/s for 4Q16 and 3,000 Bbl/s for 1Q17.

EBITDAX– DNR successfully lowered lease operating expenses and General and administrative expenses by 26% and 10% YoY, respectively, due to 11% involuntary workforce reduction initiated in 2H15. However despite this EBITDAX declined 30.5% YoY to USD 964m from USD 1.39bn on the back of aforementioned decline in revenue.

FCF- During the year, operating cash flow dipped 41% YoY to USD 864m due to abovementioned decline in EBITDAX, while free cash flow turned positive to USD 171m from negative USD 27m in 2014, owing to reduction in capex to USD 534m in 2015 from USD 1.07bn in 2014. For 2016, DNR has guided USD 200m capital expenditure.

Going forward, as per EIA’s (U.S Energy Information Agency) oil prices are likely to hover around USD 37 per barrel in 2016, as a result the earnings in the coming quarter could be negatively impacted.



Seadrill’s cost preservation programme boosts adj. EBITDA margin to 55.9% in FY15; however huge debt load maturing in FY16-17 has forced the company to hire a financial adviser.

Seadrill Ltd (SDRL: NYSE), the Norwegian offshore drilling company presented its FY15 results on 26 February, reporting a 13.2% YoY decline in revenue to USD 4.3bn due to prolonged downturn in the offshore drilling market, resulting in higher idle time and lower day rates for certain rigs. Adjusted EBITDA saw a 5.8% YoY drop to USD 2.5bn which was in line with the company’s guidance. Yet, thanks to the ongoing cost saving programme initiated by Seadrill in 2014, adjusted EBITDA margin improved to 55.9% versus 51.5% in FY14. Seadrill did extremely well on the cost preservation front by achieving USD 832m of cash saving, exceeding its target of USD 600m for FY15. However, the main concerns for Seadrill, is its USD 10.5bn debt load, of which 4.5bn is maturing by 2017, coupled with circa USD 3bn of capex requirement through 2017. As stated in its 4Q15 conference call, Seadrill has hired financial advisors to evaluate suitable options in-light with the current market conditions, which could help the company tackle its liquidity needs and is expected to communicate its plans sometime in 1H16.

Operating cash flow for FY15 was up 13.6% YoY to USD 1.8bn from USD 1.6bn in FY14 thanks to positive changes in operating assets and liabilities, which generated USD 82m cash versus USD 418m cash used in FY14. In addition, capex for the period plunged 67.5% to USD 935m vs USD 2.8bn in 2014, as Seadrill deferred delivery of vessels to 2016 and beyond. Following this, FY15 free cash flow turned positive to USD 828m from negative USD 1.4bn last year.

New built update:  In January 2016, Seadrill successfully deferred delivery of two ultra-deepwater drillships, the West Aquila and West Libra, to 2Q18 and 1Q19, respectively, from 2Q16 previously. As a result, the company’s near-term liquidity has improved as the final yard instalment for both units of about USD 800m has also been deferred until the delivery dates. As per the 4Q15 call, Seadrill is in discussion with Dalian shipyard regarding deferral of the 8 jack-up drills, as it has mentioned that it does not plan to take delivery of any rigs during 2016. Further, Seadrill’s subsidiary, North Atlantic Drilling Ltd (NADL), signed a standstill agreement with Jurong Shipyard (Jurong) and deferred delivery of the West Rigel drill rig (scheduled in December 2015) until June 2016. However, if NADL fails to get the unit contracted until June 2016, it will form a joint asset holding company for joint ownership of the unit with Jurong holding 77% and NADL 23%. Consequently, Seadrill has removed West Rigel from its newbuilds and future capex, and is now classified as an asset held for sale. Seadrill’s another subsidiary, Sevan Drilling, exercised a six-month option for the first time to extend the deferral agreement with Cosco Shipyard to 15 April 2016 and amend the terms relating to instalment payments.

As of FY15, Seadrill had 38 rigs of which 29 were operational. Furthermore, the company has 13 rigs rolling off contract in 2016 and 11 rigs in 2017, which will substantially impact Seadrill’s future revenue and EBITDA generation. Moreover, it does not have any contracts for 13 rigs that are currently under construction. Despite sufficient headroom under its net leverage covenant, which stood at 3.58x in FY15 against a test of 6.00x, it may face problems in 2016 depending on how successfully it shields its EBITDA decline and efforts to defer its new-builds, as these factors could require Seadrill to take additional debt to finance those rigs. As at 24 February 2016, Seadrill had an order backlog of USD 5.1bn, comprising USD 3.9bn for its floater fleet and USD 1.2bn for its jack-up fleet, with average contract duration of 18 months and 13months, respectively. For FY16 the company has contracted revenue guidance of USD 2.3bn and 1Q16 adj. EBITDA is estimated to be around USD 450m. Considering, an average of the last 3 year adj. EBITDA margin of 53%, FY16 EBITDA could be around USD 1.2bn which may lead to a breach in net leverage covenant in FY16. Hence, the company may need to ask for an amendment to its covenants or a waiver in the coming quarters.

Covenant summary: In May 2015, the company amended its covenants under the senior secured credit facilities. Under the amended terms, the permitted net leverage ratio has been amended to the following:

  • A test of 6.00x from 2Q15 to 3Q16
  • A test of 5.50x for FY16
  • A test of 4.50x from 1Q17 onwards.

The company also has an interest coverage ratio covenant of >2.50x for all periods tested quarterly and a minimum liquidity test of USD 150m amongst others.


In addition to the debt guarantees provided by Seadrill to its subsidiary North Atlantic Drilling Limited (NADL) in 2015, Seadrill has further agreed to provide new financing of up to USD 75m to its affiliate, Archer Limited, by 30 April 2016 if the latter does not have sufficient funds for repayment and cancellation of commitments under the multi-currency revolving facility agreement. The company has complex debt agreements with its subsidiaries along with a cross-default risk. On 1 March 2016, Moody’s downgraded the corporate rating of Seadrill Partners (SDPL), an affiliate of Seadrill, to Caa2 from B2, reflecting continued weakness in the offshore drilling industry and the company’s substantial funding requirements through 2017. Earlier in December 2015, S&P had also downgraded SDPL to B from BB- citing similar reasons.


In August 2015, Seadrill entered into a five-year USD 450m senior secured facility and repaid the remaining USD 21m outstanding under its USD 700m senior secured facility and USD 350m 6.5% unsecured bond, both due in October 2015. Additionally, the company repurchased USD 51.8m of its USD 1bn 6.125% senior unsecured bond due September 2017, reducing total debt to USD 10.5bn at end-FY15 from USD 12.5bn at end-FY14. As at 31 December 2015, the company had USD 1.2bn of cash and cash equivalents (including restricted cash), as opposed to short-term maturities of USD 1.5bn (debt maturity amount includes scheduled debt amortisation payments). Further, Seadrill could receive some support from its major shareholder, John Fredriksen, who has started buying the company’s corporate bonds in December, as stated in an interview with Norwegian business daily, Dagens Naeringsliv. However, his support would be limited by the fact that, he has invested his own money and formed a new entity Sandbox, aimed at buying new builds which are ready at shipyards, when offshore drillers are finding it difficult to fund their new builds.

In conclusion, with limited shareholder support and approximately USD 7.5bn of capex and debt maturities to tackle through 2017, it is likely that Seadrill would opts for debt restructuring in the next 10-12 months in order to postpone its bond maturities and reduce bank loan amortisations. However, considering the fact that Seadrill is one of the biggest clients among offshore drillers for banks with USD 8.2bn of bank debt outstanding as at FY15 (78% of total FY15 debt), it might get support from its lending banks, as most industry players are struggling.

Business profile: Seadrill Ltd is a Norwegian-Bermudan provider of offshore drilling services. The company owns and operates 56 offshore drilling units, consisting of 13 semi-submersible rigs, nine drill ships, 21 jack-up rigs and 13under-construction tender rigs. Seadrill operates under three business segments: Floaters (65.1% FY15 total revenue), jack-up rigs (29.4%) and others (3.4%). As at 31 December 2015, the company had 7,103 employees.


Premier Oil’s FY15 top-line down 33% YoY due low oil prices and a slump in volumes; proposed acquisition of E.ON’s North Sea assets for USD 120m.

Premier Oil (PMO:L), the UK based oil and gas company, published its FY15 results on 25 February, reporting a 33% YoY drop in revenue to USD 1.1bn compared to USD 1.6bn in FY14 due to decrease in production volumes and low oil price scenario. During FY15 average production dropped 10% YoY to 57.6K barrels of oil equivalent per day (boepd) versus 63K boepd in FY14, due to portfolio rationalisation which commenced with the sale of the UK North Sea Scott area assets in December 2014, and sale of Block A Aceh in Indonesia and the Norwegian business during 2015. Consequently, following the top line decline, FY15 EBITDAX slumped 30% YoY to USD 752m. Earlier, in August 2015, Premier got its financial covenants amended through June 2017, in anticipation of weak earnings and a possible covenant breach. As per the amendment, Net Debt/EBITDAX test level was modified from 3.00x previously to 4.75x until FY16, 4.50x for 1H17, post which it returns to its pre-modified level of 3.00x for FY17. Similarly, interest coverage ratio test was amended to 3.00x until 1H17 and 4.00x in FY17. Net debt as at 31 December 2015 stood at USD 2.2bn, 5% higher compared to FY14, taking net debt/ EBITDAX for the period to 2.95x versus 1.97x in FY14.

In January 2016, Premier oil made an announcement to acquire E.ON’s oil and gas production assets in the North Sea for USD 120m plus working capital adjustments. The deal is said to be financed through the proceeds of USD 120m that Premier received in December 2015 from the aforementioned sale of its Norwegian assets, which were undeveloped oil fields and required further investment to commence production However, E.ON’s assets will immediately add around 15k boepd of oil and gas production to Premier’s output and boost its cash flows. Further, 1/3rd of E.ON liquid production is hedged at USD 97 per barrel which would benefit Premier in this oil price turmoil.  Moreover, operating cash flow from the new assets will not be taxed in the near future, as Premier has USD 3.5bn of historic tax losses it can set against UK production. However, in order to finalise the deal, Premier voluntarily suspended its share trading from 13 January 2016 to 31 January 2016, as the said acquisition was classified as a reverse takeover under the UK law. The transaction completion is still subject to approval by Premier’s shareholders in March or April and Premier’s lending group. Amongst other synergies, the acquisition would provide additional headroom on the amended covenants. As stated by Premier’s management, the E.ON deal should increase the group’s borrowing limit by around USD 500m in 2016.

Operating cash flow (OCF) for FY15 was down 12.4% YoY to USD 810m due to abovementioned drop in EBITDAX, while free cash flow improved to negative USD 54.7m versus negative USD 239m in FY14 owing to 17.1% decrease in capex and cash inflows owing to asset disposals during the year. Going forward, the company would continue to invest in its approved projects, Solan and Catcher which are expected to start production in 1Q16 and mid-2017, respectively. Further, the company is looking to reduce its capital costs and hence has put its unsanctioned projects under review. However, looking at the current oil prices it is less likely that Premier would generate enough cashflow to cover its capex spending in FY16 which is expected to be around USD 700m. This may require the company to make additional drawings under its credit lines during 2016. Although with the Catcher project expected to come on stream in 2017 and capex being reduced to USD 400m, a positive FCF is expected 2017 onwards.



As at 31 December 2015, the company reported liquidity of USD 1.2bn comprising of cash and undrawn credit facilities opposed to no significant maturities before 2017 when a USD 307m of repayment is due. Further, management also stated that it is in process of selling its Pakistan business which would increase liquidity in the short term but will stop the cash flow generated through these assets. Looking ahead, production for FY16 is expected to average 65-70k boepd including contribution from E.ON’s assets and the Solan project in the coming months. As a result, this incremental production and smart hedging is likely to support FY16 revenue of USD 1.3bn. The company also expects to save around USD 50m through reduction in opex and general and administrative expenses during FY16. In conclusion, integration of E.ON’s assets, timely delivery of its key projects, conservative capital spending and successfully shielding EBITDAX through cost cutting would determine the company’s fate in the next few years.


Fiat Chrysler Automobiles announces US retail sales for February 2016

FCA US LLC 2016 U.S. sales increased 12 %; Best February Sales Since 2006

  • 71st-consecutive month of year-over-year sales gains
  • Jeep® brand sales up 23 percent; best February sales ever
  • Jeep Cherokee, Jeep Wrangler, Jeep Patriot, and Jeep Compass record their best February sales ever
  • Dodge brand sales up 12 percent; Dodge Journey and Dodge Challenger log their best February sales ever
  • Ram pickup truck posts best February sales ever

Auburn Hills, Mich., March 1, 2016 – FCA US LLC today reported U.S. sales of 182,879 units, a 12 percent increase compared with sales in February 2015 (163,586 units), and the group’s best February sales in 10 years.

The Jeep®, Dodge and Ram Truck brands each posted year-over-year sales gains in February compared with the same month a year ago. The Ram Truck brand’s 27 percent increase was the largest sales gain of any FCA US brand during the month. The group extended its streak of year-over-year sales gains to 71-consecutive months.

“Continued strong consumer demand for our Jeep vehicles drove the Jeep brand to its best February sales ever, while our Ram pickup truck and Ram vans recorded their best February sales ever,” said Reid Bigland, Head of U.S. Sales. “Overall, FCA US realized its best February sales in 10 years and our 71st-consecutive month of year-over-year sales increases.”

Nine FCA US vehicles set records in the month of February, including four Jeep brand vehicles. The Jeep Cherokee, Jeep Wrangler, Jeep Patriot, and Jeep Compass each posted their best February sales ever. In addition, the Ram pickup truck, the Ram ProMaster and Ram ProMaster City vans, and the Dodge Journey crossover and Dodge Challenger muscle car each posted their best February sales ever.

FCA US finished the month of February with an 88-day supply of inventory (673,494 units). U.S. industry sales figures for February are internally projected at an estimated 17.9 million units Seasonally Adjusted Annual Rate (SAAR).

Ram Truck Brand: Ram Truck brand sales, which include the Ram pickup, Ram ProMaster, and Ram ProMaster City, were up 27 percent in February, the brand’s best February sales since 2002. Ram pickup truck sales were up 23 percent last month, its best February sales ever. U.S. News & World Report last month named the 2016 Ram 1500 the “Best Full-size Truck for the Money.” It was the third year in a row that Ram’s half-ton entry has won the award. Both the Ram ProMaster and Ram ProMaster City vans recorded their best February sales ever. The Ram Truck brand unveiled the 2017 Ram Power Wagon last month at the Chicago Auto Show. The new Power Wagon features a number of off-road-specific enhancements, including a unique suspension with more than two inches of lift, locking differentials and a 12,000-lb. winch, giving it a significant advantage over all production pickups.

Jeep® Brand:  Jeep brand sales were up 23 percent in February, the brand’s best February sales ever and its 29th-consecutive month of year-over-year sales gains. The Jeep brand has set a sales record in every month dating back to November 2013. The Jeep Cherokee, Jeep Wrangler, Jeep Patriot and Jeep Compass each recorded their best February sales ever. The Compass’ 54 percent increase was the largest year-over-year percentage gain of any Jeep brand vehicle in the month. The Jeep Grand Cherokee’s 12 percent increase marked its best February sales since 2005. Sales of the Jeep Renegade, the brand’s newest entry in its product lineup, were up 6 percent compared with the previous month of January. For a second-consecutive year, the Jeep Wrangler Unlimited last month earned Kelley Blue Book’s lowest “5-Year Cost to Own Award” in the mid-size SUV/crossover category.

Dodge Brand:  Dodge brand sales were up 12 percent last month, the brand’s best February sales since 2014 and its third-consecutive month of year-over-year sales gains. Sales of the Dodge Journey were up 3 percent, the crossover’s best February sales ever. The Dodge Challenger muscle car also turned in its best February sales ever. The Dodge Grand Caravan’s 95 percent increase was the largest percentage sales gain of any Dodge brand vehicle in the month and its best February sales since 2012. The 2016 Grand Caravan last month earned the Kelley Blue Book “5-Year Cost to Own Award” in the minivan/van category for the second time in three years. The Dodge Durango’s 22 percent increase was its best February sales performance in 10 years. The 2016 Durango is getting two new appearance packages in time for spring: Brass Monkey and Anodized Platinum. These new appearance packages will start arriving in dealerships in the second quarter of 2016.

FIAT Brand: Sales of the Fiat 500X – the latest addition to the FIAT lineup in North America – were up 52 percent in February, compared with the previous month of January. FIAT brand sales, which include the Fiat 500, Fiat 500L, and 500X, were down 9 percent in February, compared with the same month a year ago. The Fiat 500 is highest-ranking City Car in J.D. Power’s 2016 U.S. Vehicle Dependability Study. The FIAT brand has a new addition on the way this summer to its product lineup – the all-new 2017 Fiat 124 Spider. Paying homage to the original 124 Spider nearly 50 years after its introduction, the 124 Spider delivers the ultimate Italian roadster experience with driving excitement, technology and safety combined with iconic Italian design.

Chrysler Brand: Sales of the Chrysler Town & Country minivan were up 16 percent in February, the minivan’s best February sales in eight years. Chrysler 300 sales were up 10 percent, the full-size sedan’s best February sales in three years. Chrysler brand sales were down 26 percent in February, compared with the same month a year ago. Coming this spring is the all-new 2017 Chrysler Pacifica minivan, followed by the Pacifica Hybrid arriving in the fall of 2016. The Pacifica offers an all-new platform from the ground up which will provide more than 100 standard and available safety features making it the most comprehensive suite of safety features in the segment, including Surround View camera, which uses four cameras positioned around the vehicle to provide a bird’s eye perspective of the vehicle and its surroundings.


(Source: Fiat Chrysler Automobiles press release – )