GulfMark Offshore says it has “decided not to pay” interest payments it was due to make on 15 March. It has appointed financial advisors and its shares have fallen by nearly 40 per cent.
The non-payment relates to a US$13.7 million interest payment due 15 March 2017 on the company’s 6.375% senior notes due 2022 and, as provided for in the indenture governing the senior notes, to enter into the 30-day grace period to make such payment.
GulfMark said failure to make the payment “constitutes an event of default under the indenture governing the notes if the payment is not made within 30 days.”
If that happens, it would result in a cross-default under the senior secured, revolving multicurrency credit facility among GulfMark Americas, as the borrower, the company, as guarantor, a group of financial institutions as the lenders and The Royal Bank of Scotland plc, as agent for the lenders. It would also result in default on a senior secured revolving credit facility with the company as guarantor, GulfMark Rederi AS, as borrower, and DNB Bank ASA, a Norwegian bank, as lead arranger and lender.
Faced with this situation, GulfMark has retained Evercore Group LLC and Alvarez & Marsal North America LLC as financial advisors, and Weil, Gotshal & Manges LLP as legal advisors, to help it analyse and evaluate its financial condition and to help it review financial and strategic alternatives to address its liquidity needs, including obtaining additional capital and/or a financial restructuring.
One option for the company could be a restructuring agreement with creditors, which could be implemented utilising Chapter 11 proceedings – a so called ‘pre-packaged bankruptcy.’ The company’s bonds are said to be trading at around 50 per cent of face value, which suggests that creditors are already asking for significant concessions. A consortium of financial institutions and hedge funds is said to have formed an ad-hoc noteholder committee.
As reported by OSJ in October 2016, Charles Fabrikant-led Seacor Holdings has already expressed an interest in acquiring GulfMark. Mr Fabrikant said six months ago that he believed GulfMark was “at a crossroads” and that one option for it would be to choose to restructure its debt and combine with a financially stronger partner. Mr Fabrikant said uncertainty in the market, coupled with GulfMark’s balance sheet, “put the issue of GulfMark’s survival front and centre.
“As noteholders, we believe restructuring to create a manageable level of debt is priority number one. Consolidation to generate cost synergies and operating efficiencies of scale enhances the potential benefit when a recovery materialises,” he said. Mr Fabrikant said public filings by GulfMark showed “that it appears to face a liquidity shortfall and very little cash has been generated from operations. It appears to be only a matter of time before GulfMark will be in covenant default.” If the company is unable to secure other solutions to its difficulties, one option that has already been aired would be for GulfMark to be acquired by Seacor in a court supervised process.