Deutsche, Others Arrange Seadrill Term Loan Increase, Revolver
Seadrill Partners announced that it upsized the proposed $1.7 billion term loan B announced on January 31 to $1.8 billion and priced the term loan at Libor plus 3%, the low end of the range. Concurrent with the term loan, the company will obtain a $100 million secured revolving credit facility.
Deutsche Bank Securities is acting as sole global coordinator. Deutsche Bank Securities, Credit Suisse Securities (USA), Barclays Bank PLC and RBC Capital Markets are acting as joint lead arrangers and joint bookrunners. ABN AMRO Capital USA, HSBC Securities (USA), ING Bank NV and BNP Paribas Securities are acting as co-managers.
Subsidiaries of the company will be the borrowers under the facilities, guaranteed by certain further subsidiaries and secured by four of the company’s ultra-deepwater drilling rigs and certain other assets. Total secured debt for the four assets is approximately $1.1 billion and proceeds of the term loan are to be used to refinance existing indebtedness, pay transaction expenses and for general company purposes. The loans are subject to customary closing conditions.
In conjunction with the formation of Seadrill Partners in 2012 and subsequent dropdown of the West Sirius and West Leo, back-to-back and intercompany loans were used to finance the debt portion of the transactions. As well as being overly reliant on Seadrill Limited, this structure had an aggressive amortization profile that was not optimal for Seadrill Partners. The 1% amortization profile of the new facility will enable the company to more efficiently manage its replacement capital expenditure reserves by investing in new assets. In conjunction with the term loan B and revolver Seadrill Partners obtained a credit rating of BB- / Ba3. As a rated entity Seadrill Partners’ access to and cost of funding will be improved, increasing financial flexibility.
Graham Robjohns, CEO of Seadrill Partners, says, “This transaction is an important step in the development of Seadrill Partners. The new structure creates a more efficient capital structure, independent of Seadrill Limited, and makes additional funds available for growth. Seadrill Partners has the high-quality fleet, visible growth profile and long-term contracted cash-flows required to access the term loan market at attractive rates. The pricing achieved is evidence of the market’s appreciation of these characteristics and highlights the unique qualities of Seadrill Partners.”