Haavind’s Offshore and Restructuring team assist pro-actively to find solutions

The recent fall in oil prices has caused reduced activity levels on the Norwegian continental shelf and a focus on cost cutting by the oil companies.  This has again resulted in financial challenges, decreasing asset values and a need for down-sizing in the offshore industry with some companies being forced to go into financial restructuring.

Haavind has established a dedicated offshore restructuring team covering all relevant areas of expertise to ensure that our clients within the offshore industry will be provided with necessary legal assistance adjusted to the particular needs of the offshore industry.

Approximately NOK 120 billion of high-yield loans has been issued by companies within the offshore industry and a majority of the offshore companies are also financed through bank loans. It has been predicted that many of these companies will default as a result of the challenging market situation. In addition, a large portion of the outstanding high-yield bonds will mature in 2016 and 2017 and it is likely to become more challenging to achieve a refinancing of these loans with the current market situation.

Bank loans as well as high-yield bonds in the offshore industry are often secured by most or all of the assets of the issuer. However, in a difficult market situation enforcement through a forced sale of assets will not necessarily be of much value to the creditors.

Many issuers will need to ask for a waiver or a change of covenants under the relevant loan agreements, which under a Norwegian bond loan agreement can be achieved by a 2/3 majority approval at the bondholders meeting. However, a temporary waiver or adjustment of covenants may not be sufficient to solve the underlying challenges if the oil prices remain at the current levels.

An important lesson from previous restructuring processes is the importance of starting early with planning and assessing relevant courses of action in the event of a potential financial restructuring. Companies and their respective members of the board of directors and management should also be aware of the duty to take action under the Norwegian Companies Act and the Norwegian Criminal Code if e.g. the level of equity is no longer adequate and the risk of liability if action is not taken to secure values and avoid bankruptcy.

Haavinds team of offshore and restructuring experts can in particular assist with the following:

• Negotiation and renegotiation of offshore contracts;
• Negotiation and renegotiation of bond loans and bank loans, including waiver requests, notices etc;
• Assessment of debtor and creditor positions;
• Assessment of security and relevant stakeholder positions;
• Advising on realistic and relevant courses of action;
• Assistance in connection with negotiations with other relevant stakeholders;
• Enforcement of security;
• Downsizing measures, including outsourcing;
• Redundancy/employment matters;
• Available insolvency protection in foreign jurisdictions (Chapter 11 etc.);
• Cross-border insolvency issues; and
• Dispute resolution.

We collaborate closely with our network of international law firms to ensure our client’s interests in cross border matters.