SFL Company Ltd. (NYSE: SFL) declares that it has entered into forbearance arrangements with Seadrill Limited with regard to the lease arrangements and the related funding agreements for its 3 drilling rigs. Those forbearance arrangements will run until December 14, 2020, unless extended or terminated.
In addition, Seadrill has confirmed that it had agreed to extend its forbearance arrangements with some other lenders with regard to its Senior Secured Credit Facility Agreements, Senior Secured Notes, and its Guarantee Facility Arrangement in terms of allowing more flexibility to discuss a thorough balance sheet settlement. Seadrill has recommended, such a settlement may require the use of a court-supervised insolvency procedure,
The harsh environmental jack-up rig West Linus and the harsh environmental semi-submersible rig West Hercules remain on their separate exploration contracts from Seadrill to oil majors in the North Sea while negotiations with Seadrill and its shareholders are underway. For more than five years, the semi-submersible rig West Taurus has been owned by the lessee in layup.
As already went public, when due in October and November, Seadrill’s inability to pay rent under the leases for our three drilling rigs represented a case of default under those leases and associated funding arrangements. An occurrence of a default under leasing agreements or similar financing agreements could lead to compliance by us or the relevant secured lenders unless cured or waived. SFL also entered into forbearance arrangements with these lenders, under the same conditions as Seadrill’s forbearance agreements with these lenders, to reduce the possibility of such a situation.
At the forbearance duration, Seadrill would be allowed, from October until the conclusion of the forbearance period, using such funds earned from the charterers of certain platforms to cover running costs for those platforms. In return, SFL will receive, for the same duration, roughly 67 to 70 percent of the current contractual lease hires linked to West Hercules and West Linus. This is practically equal to the interest and amortization owing on these equipment-related insured bank loan facilities. Any over hire paid under the leases alluded to above will stay in the earnings accounts pledged to SFL by Seadrill.
Although no guarantees can be offered as to the results of Seadrill’s restructuring, SFL continues to have a positive dialogue to pursue a long-term compromise with Seadrill and the related financing banks