This week's podcast discusses key restructuring trends of 2023, Petrofac's balance sheet strengthening efforts, and highlights from the primary market. Topics include consensual deals, debt for equity exchanges, and specific debt situations. Petrofac's declining equity and debt, cash-raising options, and investor impact are explored. The rush to the primary market and laboratory business challenges are also discussed.
Debt-for-equity deals and new money deals with an equalization feature saw an increase in 2023 compared to 2022, indicating a shift in restructuring strategies.
Petrofac's liquidity challenges, low margins, and debt repayment concerns have impacted its equity and bond prices, raising doubts about its financial stability.
Deep dives
Key Insights on Restructuring Trends in 2023
During 2023, half of the restructuring deals concluded consensually. English restructuring techniques, such as schemes and CVAs, remained the most popular choice for non-consensual deals in Western Europe. Debt-for-equity deals and new money deals with an equalization feature saw an increase in 2023 compared to 2022. There was a shift towards debt-for-equity swaps happening outside of court, with fewer in-court equalizations. Additionally, the use of amended extend transactions in non-consensual deals grew from 17% in 2022 to 40% in 2023.
Analysis of Petrofac's Financial Troubles
Petrofac, an oil and gas service provider, has faced a significant drop in equity and bond prices due to liquidity challenges. The company needs to repay a substantial amount of bank debt over the next 12 months, while only having limited available liquidity. Legacy contracts with low or no margins and major write-downs have impacted the company's EBITDA. Despite securing promising new contracts, Petrofac has struggled to unlock advanced payments and meet cash flow expectations. Investors are concerned about the company's ability to make debt repayments and maintain sufficient liquidity.
Highlights in the Primary Market
In the primary loan market, several companies, including Schoenklinik, House of HR, Europort, and Wiena Plastics, have rushed to issue loans before the Christmas break. Equipment rental company Loxam and medical diagnostics provider SinLab also brought senior secured notes to the market. SinLab's acquisition by Sinven and the company's relatively higher credit quality made the transaction attractive to investors. The primary market activity is expected to slow down, with no more deals currently being pre-marketed.
Each episode of Reorg's weekly EMEA Core Credit podcast series features detailed discussions on issues and companies across the credit lifecycle. This week’s podcast includes discussions on:
-Key Restructuring Trends of 2023, in comparison with 2022, using data from Reorg’s own Restructuring Database;
-United Arab Emirates-based oil and gas contractor Petrofac, which is examining strategic and financial options to strengthen its balance sheet; and
-The primary market, with a roundup of what’s taken place since last week.
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