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Petrofac has secured a preliminary deal with some of its key stakeholders that will see creditors convert a majority of the UK energy services company’s debt into equity.
Under the proposed agreement, which will significantly dilute existing shareholders, Petrofac will get new long-term funding underwritten by an ad hoc group of senior secured noteholders, and an equity injection from new and existing investors to boost liquidity.
The in-principle accord was reached with stakeholders, including a group of senior secured noteholders representing about 47% of the outstanding notes and some clients with engineering and construction contracts. Petrofac said it is still in discussions with its bank lenders and its two largest shareholders, which hold about 34% of the ordinary shares and “remain supportive of the Group’s efforts in strengthening its financial position”.
“Whilst we have not yet reached the finish line, this is a significant step towards securing a deal which will materially reposition Petrofac with a stronger balance sheet and improved liquidity,” Chairman René Médori said.
According to the statement, the agreement also seeks to renegotiate agreements with some clients in order to safeguard critical contracts in the group’s backlog. Petrofac anticipates that the planned reorganisation will “strengthen its balance sheet” and create a more sustainable financing structure, allowing the business to execute existing contracts and win new ones.
Petrofac, with a backlog of about $8bn, has been grappling with payment delays and cost overruns at its engineering and construction arm on contracts secured in 2023. The company’s net debt was $583m at the end of 2023. |
