Seeking Alpha

Seadrill gets commitments for $1.35B credit line

  • Seadrill (SDRL) says it has received commitments for a $1.35B credit facility to refinance the credit facilities secured by the West Pegasus, West Gemini and West Orion.
  • SDRL says the transaction initially was launched as a $900M facility secured by two ultra-deepwater units, but the facility was upsized to $1.35B by including an additional ultra-deepwater unit due to strong interest from the banking group.
  • SDRL says the refinancing will provide $350M in additional cash.
  • SDRL -1.4% premarket.
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Comments (16)
  • Husker Bob
    , contributor
    Comments (707) | Send Message
     
    Where's A Prudent Investor with his negative take on this? Just the other day he was pointing out how SDRL is doomed because it has no access to credit. Waiting for his spin on this one, or has he finally realized he has zero credibility.
    10 Jul 2014, 09:56 AM Reply Like
  • A Prudent Investor
    , contributor
    Comments (1192) | Send Message
     
    Here is my analysis Husker Bob, this is a refinance and they only managed to re-fi a small portion of their $18 billion of debt due in less than 3 years and they were only able to squeeze out $350 million for additional funding. Now 17 bank consortium has encumbered these rigs at a variable rate. A 2% plus base rate margin is not cheap debt. There is no such thing as cheap debt. It shows that they had this re-fi already when they announced their convertible offerings. They didn't create a consortium bank loan over night.

     

    Seadrill shot themselves in the foot with public nonbank unsecured debt and now they have to take the bank's deal. The convert deal had a two day window with no prospectus which means it was rushed and ill planned. You can rely on half truths but I like the whole truth when I invest. If I have to spend the time questioning managements financial decisions every day. I'm not interested. There are a lot of investment grade well run and prudent companies to invest. Its your money at risk and not mine!
    10 Jul 2014, 11:29 AM Reply Like
  • WestEndDividend
    , contributor
    Comments (207) | Send Message
     
    API,
    Why do you comment on every Seadrill article if you are not interested? I always want to hear other opinions so I personally appreciate it, but I don't often see such committed criticism.

     

    I am just curious
    10 Jul 2014, 12:10 PM Reply Like
  • The Rebel
    , contributor
    Comments (1410) | Send Message
     
    API- " If I have to spend the time questioning managements financial decisions every day. I'm not interested."

     

    You certainly spend a lot of time doing just that for someone not interested. Rather hypocritical, wouldn't you say?

     

    Is there anything SDRL could do that would rate a positive comment from you, short of reduced or complete elimination of dividends?
    10 Jul 2014, 01:18 PM Reply Like
  • rashbaugh
    , contributor
    Comments (772) | Send Message
     
    "There is no such thing as cheap debt."

     

    Well, I guess you will never be satisfied, unless all deals are for cash.
    10 Jul 2014, 02:47 PM Reply Like
  • mapodga
    , contributor
    Comments (4236) | Send Message
     
    Probably should be gift instead of loan that would satisfy PI :)
    10 Jul 2014, 07:17 PM Reply Like
  • hallereugene@gmail.com
    , contributor
    Comments (401) | Send Message
     
    Again no financial comment. You are holding a debt ridden stock with no access to financing.

     

    These rigs were already financed. Seadrill needs operating cash and substantial equity financing to handle $18 of debt coming due in less than 3 years. You are being fooled by press releases. Seadrill just burned both convertible bond deals and lost a lot of trust and credibility and an act of amateurism. Look at the whole picture and not what pleases you.

     

    What is Seadrill going to do now Captain Jim? They have $18 billion in debt maturing within 3 years with limited access to public debt. The $650 million in convertible debt is trading at 150% of par so the company cannot buy back the notes in the market and the conversion will cause 23 million shares to be issued with additional $93 million of potential annual dividends. Raising $1 billion is convertible debt is far short of what the company needs to raise to support its obligations. A dividend cut and large equity raise is inevitable.

     

    Financial trouble. Rigs are not paid for and Seadrill has no more financing options left. It's clear to me.
    10 Jul 2014, 11:17 AM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2639) | Send Message
     
    Their debt is primarily secured debt - backed by collateral. Banks are generally more willing to lend if they know they get to take control of your $450m rig or $450k house if you default. You're not guaranteed the same rate when the term is up, but most of the time they're happy to renew loans at some rate or another. If the converts would've been prohibitively expensive, going with secured debt seems like the better option. Banks don't prefer lending to clients with high debt levels, but as long as you've got assets to secure loans, they will keep lending.

     

    Their actions over the last few days impressed me. Clearly they're appealing to a different kind of shareholder - the ones that actually own shares?

     

    Long SDRL, calls/shares.

     

    -Mike
    10 Jul 2014, 11:31 AM Reply Like
  • A Prudent Investor
    , contributor
    Comments (1192) | Send Message
     
    The bank debt was the only option after the convert collapsed in their face. I owned Seadrill shares far longer than you have and smarter to sell it at a $23 per share profit. So I am well qualified to comment on it. It took 17 banks to participate in this small refinance. Each bank limited their exposure and you have no collateral and stand behind them. Good luck!
    10 Jul 2014, 12:41 PM Reply Like
  • mapodga
    , contributor
    Comments (4236) | Send Message
     
    Hellereeugene.

     

    You need to read SDRL SEC fillings. Ther you will find all relevant information.
    In short from there - This 3 rigs coming this year, so it was all the time open issue from where to get liquidity. Also analysts question this like primary risk. Now is resolved. DOT.

     

    Nothing that you stated out is coming from official and audited reports. Can you provide source of your findings.

     

    Otherwise SDRL has 2.9 bln $ EBITDA per year so it has more then enough money for OPEX, CAPEX and dividends (fir them goes 1.6 bln).

     

    Again Eugene, you should read reports.
    Or maybe you and PI to sell your short options. Till it cost to much, because as said, after primary risk gone (concern about payments for new rigs, was such), stock can begin yo fly up.
    10 Jul 2014, 07:28 PM Reply Like
  • hallereugene@gmail.com
    , contributor
    Comments (401) | Send Message
     
    I took all my information from past PI comments and posted them here, because the question had come up where is PI now? So in order that people not have withdrawal symptoms from PI, I posted the comments. But as luck would have it he arrived and commented to others so it was printed prior to my Post.

     

    I got a chuckle out of it.

     

    Bought some more SDRL the other day. I have 50% of the money earmarked for SDRL invested in SDRL and 50% in cash waiting for some big drop.
    12 Jul 2014, 03:39 AM Reply Like
  • hhmcdon
    , contributor
    Comments (296) | Send Message
     
    Contrary to some other commentators, as a stockholder, I am very well satisfied with the just announced management actions. I am also quite pleased with my decision to add 1,000 shares of SDRL to my holdings yesterday.

     

    1. "Only a vain & foolish sailor refuses to change course in the face of a storm."

     

    2. "The prudent Captain always has a "plan B, C & D"

     

    Clearly SDRL's Skipper had a plan B and was not too timid to execute it-BRAVO!!
    10 Jul 2014, 11:38 AM Reply Like
  • A Prudent Investor
    , contributor
    Comments (1192) | Send Message
     
    When you are in the storm the ship capsizes. Seadrill is in a 500 year storm.
    10 Jul 2014, 12:41 PM Reply Like
  • hhmcdon
    , contributor
    Comments (296) | Send Message
     
    API : Your avatar is female; your logic coincides with that of my dear departed Mother-in-law who had no talent for investing. The only 500 year storm I know of is on the planet Jupiter. H-mm-mm.
    10 Jul 2014, 04:13 PM Reply Like
  • rocket1963
    , contributor
    Comments (65) | Send Message
     
    API shorting SDRL are you, they must be brown now
    10 Jul 2014, 08:29 PM Reply Like
  • 22403701
    , contributor
    Comments (18) | Send Message
     
    anyone but me think that prudence has more than 1 handle??
    10 Jul 2014, 10:58 PM Reply Like
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