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Offshore Oil Co. Draws Long Looks At Waiver Deadline

01 Dec 2003

Market players last week were keeping a close eye on Stolt Offshore's discussions with lenders as waivers to the company's bank debt were scheduled to expire.

Market players last week were keeping a close eye on Stolt Offshore's discussions with lenders as waivers to the company's bank debt were scheduled to expire. The expiration was scheduled at the close of U.S. business on Nov. 26, after LMW went to press. Stolt's bank debt was quoted wide in the 70-80 context, but those watching the name said the paper had not yet traded. Distressed players are scouting the paper see if it is worth grabbing. Lenders are holding out for a rebound. "Lenders are sitting pretty. They think they are going to stay whole," said one buysider. "Banks have not marked it down and they are probably not going [to] worry about year end yet."

But there are still many uncertainties surrounding the credit, not the least of which is Stolt Offshore's ability to receive bonding to back its contracts, said European loan sources. The company is an offshore contractor to the oil and gas industry. One buysider explained that the situation is much like the chicken and the egg. If the credit is bad, the company will not be able to get bonding and therefore not be granted contracts, he said. But if the company is not given contracts, the credit will not be able to improve, he added. Currently, there is a sense that Stolt Offshore will be able to handle the first of three bonding requirements, although the two remaining may cause a problem, another buysider said. Still, market players pointed to the company's recent contract worth about $280 million, for the installation of part of the Ormen Lange pipeline, as a positive sign.

Stolt Offshore received waivers to its two primary credit facilities in the face of potential covenant breaches. The facilities include a $440 million multi-currency revolver via Den norske Bank and a $100 million line, which breaks down into a $55 million multi-currency revolver and a $ million bank guarantee facility. The agent on the line is Nordea Bank.Citigroup , Den norske Bank, HSBC Bank, ING Capital and Vereins-Und Westbank Aktiengesellschaft are also involved in the credit. The company scheduled a conference call for last Friday to provide an earnings update and a pre-close update for the fiscal year 2003. The timing of the conference call was designed to reflect the discussions with Stolt Offshore's lenders.

Stolt Offshore is pursuing its "Blueprint" plan to financial recovery, which includes cost saving measures such as the reorganization into new regional businesses and the disposal of assets and businesses. "The Blueprint for financial recovery and its rapid implementation has provided the basis for Stolt Offshore to progress its negotiations with its lead creditors. The purpose of these negotiations is to redress potential covenant breaches, to increase performance bond capacity and to agree appropriate utilization of cash proceeds from the divestment programme," according to company statements. Stuart Jackson, Stolt Offshore's cfo, did not return calls by press time.

01 Dec 2003