Pursuant to the lock-up agreement entered into by FELS Offshore, Floatel International, and bondholders in December 2020, Keppel has reached a consensual transaction with the various relevant parties for the restructuring of Floatel, with completion of the transaction expected by March 24.

The transaction will take place at Floatel itself, without a new entity acquiring certain subsidiaries of Floatel that own and operate vessels, as originally proposed. Floatel will retain ownership of all its subsidiaries, including those that own and operate the vessels.

FELS will retain its 49.92% ownership in Floatel, while a subordinated loan from FELS to Floatel of US$244 million ($327.22 million) will be forgiven.

Floatel’s US$400 million first-lien (1L) bonds will be converted to new 1L bonds of US$230 million, split into a US$115 million portion under which interest shall be paid by cash, and a remaining US$115 million under which interest shall be paid by the issuance of additional bonds, as well shares in Floatel representing 40.08% of its total issued share capital.

Upon completion of the consensual transaction, Floatel will make cash redemptions on the new 1L bonds to reduce the principal amount of both portions to US$100 million respectively.  To fund the cash redemptions, Floatel has taken on a new super senior revolving credit facility (SSRCF) of up to US$100 million from Clifford Capital, a unit of Temasek Holdings. The SSRCF and the new 1L bonds are secured against the Floatel vessels, as well as other assets related to these vessels, including without limitation, ship mortgages over the vessels, share pledges in respect of various subsidiaries and floating charges.

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SEE:Keppel O&M associate Floatel and lenders agree to deliver full discharge of security over bank vessel assets

Keppel Offshore & Marine (Keppel O&M), a wholly-owned subsidiary of Keppel, has entered into a participation agreement with Clifford Capital that holds Keppel O&M liable for any loss that Clifford Capital suffers on the new credit facility.

Floatel’s second-lien (2L) bonds will be converted into warrants with a 10-year term which convert into 12% of the post-conversion equity in Floatel, with a strike price based on an equity value of US$424 million. Shareholders of Floatel prior to the consensual transaction (other than FELS) will have their shares converted into warrants with a 10-year term which convert into 5% of the post-conversion equity in Floatel, with a strike price based on an equity value of US$625 million.

In addition, 10% of the common shares in Floatel will be allocated to a management incentive programme for members of the management team of Floatel.

According to Keppel, the transaction is not expected to result in any impairment to its carrying value of Floatel which totals $96 million as of FY2020 ended December 2020.

Shares in Keppel closed 2 cents or 0.39% higher at $5.15 on March 19.