July 2, 2018 / 10:53 AM / 19 days ago

UPDATE 1-No debt waiver extension for Fred. Olsen Energy, shares drop

(Adds share price, analyst quotes, share price)

OSLO, July 2 (Reuters) - Creditors in Fred. Olsen Energy have not extended a waiver on the terms of the company’s debt agreements, the Norwegian drilling rig contractor said on Monday, sending its shares as much as 27 percent lower.

The company had previously warned it might need new equity and a potential impairment of its bank and bond loans to achieve a long-term solution for its financial problems.

A number of offshore rig owners had to restructure their debts, and some went out of business, due to prolonged decline in demand after oil prices plunged in 2014.

Prices have partly recovered since hitting a low in January 2016, and demand for drilling rigs, especially in the North Sea, has increased.

“I hope they will come to the agreement (with creditors)... The market’s recovery should help that by providing more opportunities to win new contracts,” Fredrik Lunde, head of research at Carnegie, said.

Nordic banks DNB, Danske and Nordea hold the bulk of Fred. Olsen Energy’s bank debt.

The waiver granted in January expired on June 30, and the financial terms of the debt agreements will be tested on July 20, the company said.

Fred. Olsen Energy said it would operate as normal while continuing talks with stakeholders, creditors and their advisers.

At the end of 2017, the company had $759 million outstanding under a syndicated bank loan, and a bond loan worth 1 billion crowns ($122 million) maturing in February 2019.

During the first quarter, the company made a scheduled payment of about $95.5 million under the bank facility.

Fred. Olsen Energy’s fleet consists of three deepwater and four harsh environment mid-water rigs, of which only one is being used - under a short-term contract with BP.

The company’s shares were down 15 percent at 1045 GMT, underperforming the wider European oil and gas index which was down 0.7 percent.

$1 = 8.1769 Norwegian crowns Reporting by Nerijus Adomaitis; Editing by Gwladys Fouche and Mark Potter

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