Sete Brasil drill ships bid offer below minimum

4/17/2019

Magni Partners presented the best offer for the purchase of the four drill ships of the group – Urca, Frade, Arpoador and Guarapari – with the proposal of US $ 250 million. However, as the price was well below the minimum value of $ 554 million, the result of the bidding will still have to be appraised and approved by the creditors.

The offer brings Etesco as operator and provides for the payment of $ 62.5 million for each of the rigs. The proposed value overstepped the offer of the Keppel Fels shipyard, which presented a price of US $ 50 million for the acquisition of the two semisubmersibles under construction by the group at the Brasfels shipyard in Angra dos Reis (RJ), US $ 35 million for Urca and $ 15 million for the Frade.

Sete Brasil and law firm Alvarez & Marsal, who advises the group on the sale, will try to schedule the meeting in April, but the date can only be confirmed if the 22 creditors evaluate the terms of Magni’s proposal and discuss the with their boards. If the internal agenda of the companies extends longer, the meeting for approval of the final price will be postponed to the first week of May.

BE Petróleo found that the board of Sete Brasil, Alvarez & Marsal and Licks Contadores Associado – judicial trustee of the process – would be in favor of approving the bidding outcome. Weigh in favor of the evaluation the technical and legal imbroglio that involves the project and the fact that this may be the last opportunity to recover part of the loss accumulated with Sete Brasil. As anticipated, there was already the expectation in the market that the offers would fall below the level established in the bidding document.

The meeting to approve the $ 250 million price follows the approval process of the judicial recovery plan of Sete Brazil. Prior to approval, at the beginning of November, 14 deferrals of the General Meeting of Creditors were registered.

Many of the creditors have the perception that it is better to guarantee a lower figure than to risk other initiatives, but the fact is that there are several possibilities open: approve the offer immediately, request negotiation with Magni to improve the conditions, disapprove the proposal and request the opening of a new bid or not approve the price and request the liquidation of Sete Brasil.

Another option would be to seek a negotiation with the shipyards to try to review the value needed for the completion of the rigs. Executives involved in the operation understand that Brasfels and Jurong Aracruz (ES) – the latter responsible for the construction of the Arpoador and Guarapari rigs – presented high budgets for the proponents and that had a negative impact on the value of the offer.

The list of creditors of Sete Brasil includes 12 shareholders (BTG Pactual, Luce, EIG Global Energy Partners, Lakeshore, Previ, Petros, Funcef, Valia and FI-FGTS, Santander, Bradesco and Petrobras), five banks and five shipyards. The debt of the group amounts to about $ 5 billion, and the projection is that only 10% of that amount will be honored.

If creditors choose to approve Magni’s commercial proposal, the outcome of the bidding will still depend on Petrobras. As the four rigs will be under contract with the Brazilian oil company for ten years – chartered at a rate of US $ 299 thousand / day – the oil company’s board will have to approve the name of Etesco as the unit operator.

The delivery of the proposals was held on April 4, but Licks Contadores Associados opted not to disclose the amounts presented before making a preliminary analysis of the offers

Source: Brazil Energy Magazine

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.