I have been told by mutliple credible people now that Boskalis are negotiating directly with the Bibby Offshore bondholders to purchase certain assets of the company that would in effect be the refinancing of the company. Booskalis are pitching at around .30 which values Bibby Offshore at c.£52m if true. For that they would get the Sapphire, Polaris, and all intellectual property etc and simply collapse the North Sea business into their current operations. The rest will be left for the creditors who will make a minimal recovery.
Despite the fact the bonds have recently traded at .39 if I was a bondholder I would jump at this offer and be running to find a pen to sign. The only other option is likely to involve them putting money in or a hugely dilutive liquidity issue (like the Nor Offshore one). Instead this is clean and well above any possible recovery they would get in a liquidation event.
The London high-yield market will get a timely reminder that covenant light issues have real risks. The Bibby shareholders took a £39m dividend when the bond was issued and another £20m at the start of 2016, at that stage they must have known the order book was empty, in the end the company lost £52m at the operating profit level that year. As I have said before at that stage this event, or if it doesn’t happen one similar, became only a matter of time. Bibby Offshore may not have created as much value as Bibby Line Group would have dreamed only a few years ago but they have still done okay out it, whereas bondholders who in effect lent a non-ammortising loan on depreciating assets at the peak of the market, have suffered severe losses. They should be thankful however because a Nor scenario that saw them taking delivery of the Polaris and Sapphire in this market would have seen losses I believe as high as 90-100%.
It will be very interesting to see what happens to the Topaz. I suspect Boskalis don’t need it and will seek a charter that is 100% risk based if at all. I could be wrong on this as they have substantial North Sea operations and windfarm backlog that could use the vessel in a support role. Either way Bibby will revert to a small UK 2 or 3 x North Sea DSV operation supporting the Boskalis operations in Europe with management 100% dominated by Boskalis.
Whether this is in effect a hostile offer or is supported by Bibby Line Group I don’t know. I would struggle to see it being friendly given it would wipe out BLGs equity entirely but it would be the best thing for the company and provide a degree of security or at least certainty for those involved. The bond requires, according to my broad reading, only that interest payments are current and that BOHL has £10m, so a struggle whereby the necessary administration is delayed for a situation that cannot be changed would help no one. Waiting until December for an interest payment that cannot be made (interest accruing at c. £35k per day), or for the cash covenant to be broken allowing the bondholders to act, would be disastrous for their postion. The only thing I am sure of here is that some very expensive lawyers from both sides will be reviewing the bond indenture very carefully.
A competing offer from private equity looks unlikely as they simply do not have the contract coverage Boskalis does to risk some overhead on the vessels. Boskalis can probably release some chartered tonnage and have the DSVs work as ROV vessels on some of their windfarm projects if needed. For Boskalis this is a very sensible acquisition that offers upside only for them really with very minimal risk on running costs.
This will not take long to play out. When the BOHL financials are released it will all become obvious because if the assets have been revalued at anything like market levels it won’t just be a liquidity issue but a solvency one forcing the Directors to protect the creditors, and highlighting how close they company is to running out of actual cash. Resolution by the end of August is my prediction here.