Billionaire’s Bargain Reveals Risks for Offshore-Oil Creditors


A bargain for shipping tycoon George Economou is bad news for creditors holding $24 billion of distressed offshore-drilling bonds.

The Greek billionaire snapped up a drillship called Cerrado for less than 10 percent of its 2011 new-build price, showing how a collapse in crude has driven down the value of offshore equipment. The industrywide slump, which stretches from helicopters to oil rigs, means lenders could end up holding collateral worth a lot less than they are owed.

“It’s shocking,” said Alex Brooks, an analyst at Canaccord Genuity Group Inc. in London. “Creditors can’t ignore anymore that the value of the assets on their loans and bonds may be lower than they previously thought.”

 The sector’s financial cracks have spread in recent weeks, with Seadrill Ltd. seeking to restructure the largest debt load among offshore drillers, and Harkand Global Holdings Ltd., which is owned by Oaktree Capital Group LLC, defaulting. Helicopter operator CHC Group Ltd. has also followed rig owners Sete Brasil Participacoes SA, Hercules Offshore Inc. and Grupo Schahin into bankruptcy, as oil companies cut exploration and production.

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