For immediate release: 13th October 2010
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH
AFRICA OR JAPAN
CQS Rig Finance Fund Limited
Extension to Financing Arrangements and Trading Update
The Company is pleased to announce the following updates:
* Agreement in Principle to Extend the Company's Secured Financing Facility
* Execution of an Extension to the Company's Subordinated Financing Facility
* Publication of the Company's Shareholder Fact Sheet for 30th September 2010
* Portfolio Update
* Market Outlook
Extension to Financing Arrangements
The Company has now agreed, in principle, the terms for extensions to its
secured financing arrangements ("Secured Facility") with Credit Suisse
Securities (Europe) Limited ("CS") and executed an extension to its unsecured
loan facility ("Subordinated Facility") with RBC Cees Trustees Limited ("RBC")
on 12th October 2010. The extensions to the financing facilities, which in the
case of the Secured Facility is subject to finalisation and signing of
documentation, will provide a stable liability structure to support the
Company's portfolio of investments.
The Company has agreed an extension to the Secured Facility, entered into on
22nd April 2009 which matures on 21st October 2010, to 31st March 2011. The
Secured Facility will continue to attract interest at a rate of the relevant
LIBOR rate for each Currency Amount (except for NOK which has a NIBOR rate) plus
2 per cent.
The Company has agreed with CS that the USD 2,800,000 facility fee, which is due
on the maturity of the existing Secured Facility on 21st October 2010, will be
added to the outstanding Secured Facility balances as at that date to form part
of the initial committed balances under the terms of the Secured Facility
Extension Agreement. The facility fee has been accrued in the Net Asset Value
("NAV") over the life of the existing Secured Facility and the impact to NAV
over the remaining period from the NAV on 30th September 2010 to 21st October
2010 will be approximately 25 basis points.
The Company has agreed with RBC that advances made under the Subordinated
Facility, which was originally entered into on 24th October 2008 and currently
matures on 21st October 2010, will be extended until 21st October 2011. The
Subordinated Facility will continue to attract interest at the three month USD
LIBOR rate plus 3 per cent. All other terms will remain the same.
The Subordinated Facility has been provided by RBC in its capacity as trustee of
certain assets for the benefit of Michael Hintze, Chief Executive of CQS, who
holds a majority interest in CQS Cayman LP, the Company's investment manager.
Current Liquidity Position
The unaudited Cash / (Loan) Balances per the Company's books and records as at
30th September 2010 were as follows:
Currency Local Currency Balance GBP Equivalent Balance
Secured Facility NOK 6,994,623 757,518
USD (40,546,360) (25,808,447)
GBP 20,133,015 20,133,015
Outstanding under Secured
Facility (CS) (4,917,914)
(RBC) USD (6,657,840)* (4,237,828)*
Total unaudited net cash outstanding at 30th September (9,155,743)
* Including Capitalised
The proforma total unaudited net cash outstanding at 30th September 2010,
adjusted for the USD 2,800,000 facility maturity fee due to CS on 21st October
2010, equates to GBP (10,937,990).
Monthly Shareholder Fact Sheet
CQS Rig Finance Fund Limited (the "Company") a closed-ended investment company
incorporated in Guernsey, is pleased to announce that its Monthly Fact Sheet for
September 2010 is now available on the Company's website (www.cqsrigfinance.com)
and includes information on the top ten investments and outstanding
Following the sell off in August there was a broad based risk rally in
September. European Sovereign debt concerns were once again on investors' minds
during the month but these were eclipsed by better than expected economic data
from China and the US. The S&P 500 broke through resistance levels to close the
month up 8.8% at 1141. The oil price followed the trend closely to reach the
USD 80 per barrel mark.
The final NAV per share closed up 4.5% at the end of September 2010 at 27.64
pence against 26.46 pence at the end of the prior month.
Gains were seen across much of the portfolio as demand for high yield assets
increased and three distressed positions were marked up.
Remedial (Cyprus) PLC continued to rally following the news, as reported in the
previous fact sheet, that an agreement had been reached to sell the Elevating
Support Vessel under construction at Yantai Raffles to a subsidiary of the
Rubicon Offshore Holdings was marked up in September. There were buyers of the
bonds on no material newsflow.
The Petromena 10.85% bonds were marked up in September on speculation that the
liquidation process may be progressing. ODS Petrodata reported market sources
saying that the Larsen Oil & Gas-managed semi 'SS Petrolia' is being marketed
for sale. This rig forms part of the security package for the 10.85% bond.
The Company also entered a new investment during the month purchasing the 2nd
lien bonds of RDS Ultra-Deepwater Ltd. The bonds have a fixed coupon of
11.875% and are callable in 2014 at 105.9.
Deleveraging and Financing Arrangements
Total liabilities decreased over the month from GBP18.9m to GBP10.9m at 30
September. The largest contribution to this reduction came from the sale of the
position in Sevan Drilling, as reported in the RNS announcement on 21st
September 2010. The sale of the bond was undertaken following the news that the
drilling rig had stopped operations and was on zero day-rate during a repair
period. Sevan has since announced that the rig is back in operation and the
Company has re-entered the bonds at lower levels.
The Company expects borrowings to further reduce as a result of the mandatory
call of the Skeie Drilling & Production ASA (SKDP) bonds by Rowan Companies Inc
(See Portfolio Update section for details).
The Company has agreed terms for extensions to both its secured and unsecured
financing arrangements, extending the maturities of both facilities into 2011.
Rowan Drilling Norway ASA (formerly known as Skeie Drilling & Production ASA
Following its takeover of SKDP, Rowan announced on 21 September 2010 that a
mandatory prepayment event will be triggered of all indebtedness secured by the
SKDP 1 Ltd. The SKDP1 first lien bonds will be redeemed at 108% of par value
plus accrued interest and the second lien bonds will be redeemed at 106% of par
value. The exact date of the intended call has not yet been confirmed. The
other two second lien bonds issued by SKDP may also be called but Rowan has not
made any announcements in this regard. The Company owns all four bonds issued
On 26 February 2010 Remedial Cyprus filed a motion with the US Bankruptcy Court
for orders under section 363 of the US Bankruptcy Code authorizing it to sell
substantially all of its business and assets to a nominee of the holders of the
USD 210 million FRN secured callable bonds 2007/12 issued by Remedial Cyprus.
The proceeds of the sale of the assets will form the recoveries under the
On 7 July 2010 Remedial Cayman ESV2 Limited, a wholly-owned subsidiary of
Remedial Cayman took delivery of the vessel Remedial ESV Solution from COSCO
Shipyards in Nantong, China. This vessel is presently berthed at COSCO and is
being marketed for sale. On 5 October, Remedial Cayman completed the sale of
the construction contract for its second ESV unit, and its related workover rig
package, to Coral Offshore Pte Limited, which is a subsidiary of CIMC Raffles
Offshore (Singapore) Limited (formerly known as "Yantai Raffles Shipyard
Limited") for a purchase price of USD 55.0 million. On the basis of this
purchase price and the release of Remedial's obligations under the Yantai
construction contract the transaction has a value of approximately USD 90
million. Remedial has received a 10% downpayment of USD 5.5 million for the
sale of this vessel, with the balance to be received in 9 months time.
Marine Subsea completed a successful financial restructuring in December 2009
which permitted it to attract fresh bank financing in excess of USD 200 million
from Standard Bank and the Norwegian Credit Agency Eksportfinans. This
stabilized the company for a while but subsequent disagreements with its main
customer, Sonangol, over a back-stop charter on the well intervention vessel
'Sarah' have meant that the company has not received charter payments as
expected, which in turn has led to a liquidity shortfall. The Sarah needs to be
fitted with critical lubricator equipment in order to perform well intervention
work, which is necessary for Sonangol's Canuku project. Until this is in place
Sonangol has stated that it cannot make payments under its back stop charter. As
a result of this, Marine Subsea has not been able to meet its payment
obligations to Eksportfinans and Standard Bank. Further, the company has elected
to PIK interest payments due on the bonds, as it is permitted under the bond
agreement. The company's second vessel 'Karianne' is due for delivery in
October 2010 The bonds are marked at a bid price of 28 cents.
Rubicon Offshore Holdings Limited
The two Rubicon Floating Production Storage and Offloading vessels ("FPSO") are
presently on contract and operating in Asia. The 'Rubicon Intrepid' is located
at the Galoc Field, offshore Phillipines, where it is on contract to Galoc
Production Company, the operator of the Galoc Field. The 'Rubicon Vantage' is
located at the Bualuang Field, offshore Thailand, where it is contracted to
Salamander Energy. The company's USD 180 million bond, due April 2012, is
presently performing with a USD 30m amortization scheduled for April 2011.
The Petromena ASA 10.85% 2010 bond remains in default and under restructuring.
Current outstandings under the bond are USD 264 million. The main asset
securing the bond is the 'SS Petrolia', a 2nd generation semi submersible
drilling rig. The rig completed its contract with Pemex in Mexico in July and
is presently sitting idle in the US Gulf of Mexico being marketed for sale.
Recoveries under the bond will be driven in part by the resale value of the
rig. In addition to the rig collateral bondholders are likely to have recourse
to cash held in various jurisdictions but given ongoing litigation proceedings
the timing and amount of recovery cannot be quantified with any certainty.
Bondholders have appointed financial and legal advisors to assist them in this
process. The bonds are marked at a bid price of 36 cents.
Sevan Marine ASA/Sevan Drilling
Sevan currently has three FPSO's and one drilling rig in operation. The Company
owns the four bonds which are secured on these assets. Sevan has recently made
several positive announcements regarding its vessel operations - an extension to
the FPSO contract for the 'Sevan Hummingbird' FPSO vessel on contract with
Centrica, the finalisation the commercial negotiations on the Charter Party
Agreement for the lease of the FPSO 'Sevan Voyageur' for operation on the
Huntington field and a new bank financing facility secured by an assignment of
certain future contracted cash flows. The new bank loan is a club deal arranged
by Investec Bank plc. Sevan is currently working on bank financing for the
'Sevan Driller' which will improve its liquidity position going forward and will
lead to the take out the existing Driller bonds. The call window for the Driller
bonds opens 11 Dec 2010 and runs for six months.
The first lien DDI bonds are well secured by modern jack up units, all of which
are presently on contract. These bonds are issued on a stand-alone basis and
pre-date the acquisition of DDI by the parent company, Aban Offshore Ltd. Aban
announced recently that it had received shareholder approval to raise over Rs
4,300 crore (c.USD 955 million) financing from foreign and domestic sources.
However, the company has yet to announce the timing of any capital raise.
RDS Ultra-Deepwater Ltd
RDS bought the 6th generation deepwater rig ('Petrorig III') from the bankrupt
Petromena group. This rig has been chartered to Pemex for 5 years at a day rate
of USD 495K/day for the first two years after which the charter rate would set
annually based on then prevailing market rates. On the 6th September RDS
announced that the rig had commenced operations and that the mobilization fee of
USD 34.5 million from Pemex became due.
Vantage Drilling Company (VTG)
VTG raised financing via a bond issue to acquire total ownership of an ultra-
deepwater drillship ('Platinum Explorer') and to meet the remaining construction
payments on the vessel, due to be delivered from Daewoo Shipbuilding in November
2010. Security for the transaction are first liens on the 'Platinum Explorer'
and three new premium jack-up rigs and their related charter contracts. The
next important milestone for Vantage is acceptance of the 'Platinum Explorer'
vessel by ONGC, which is expected to be at the end-December 2010.
Floatel has ordered two dynamic positioning semi-submersible accommodation
vessels from Keppel FELS Shipyard in Singapore. The first vessel, 'Floatel
Superior', was delivered on 18th March 2010 and commenced first charter
immediately on delivery. The second vessel, 'Floatel Reliance', is under
construction and is scheduled for delivery late 2010.
FPS Ocean (DP Producer)
Following DP Producer AS' bankruptcy in February 2009, no further work has been
undertaken on the FPSO and the vessel remains berthed at Drydocks World-Dubai.
The Trustee (via a bondholders' committee) and the shipyard continue to work
jointly to progress a sale; however in the face of weak market conditions their
efforts have yet to bear fruit. It is the Company's view that any sale, and
associated bond recoveries, is dependent on a fuller recovery of FPSO demand,
however opportunistic approaches from operators and/or end-users cannot not be
ruled out. The bonds are marked at a bid price of 1 cent.
As well as the positions detailed above, the Company also holds positions with
small mark to market values in Viking Drilling, Seaproduction, Petromena,
Petroprod and Nexus.
The market in general appears in better shape than 12 months ago as the oil
price has stabilised in the USD 75-85 range. Industry analysts are forecasting
further increased Exploration & Production ("E&P") spending by the oil majors
and national oil companies of 10% and by independent companies of 15% in 2011.*
Contrary to earlier expectations of some industry observers, recent data points
for ultra-deepwater new-builds indicate that day-rates have stabilized around
the USD 400-450K level, as seen for Maersk, Odfjell and Transocean units. More
recently, continuing the recent trend of strong Ultra Deep Water ("UDW")
fixtures, Dryships announced a 300-day letter of award in West Africa at a
dayrate of USD 450,000 for the first of its 4 UDW drillships under construction,
while Chevron agreed to sublet the UDW drillship Deepwater Pathfinder from Eni
at a subsidised dayrate believed to be between USD 525,000 to 550,000 for work
in the Gulf of Mexico. Following the Macondo spill in the Gulf of Mexico, new
rules for drilling operations have been released including more stringent
regulation with regards to well design, cementing and blow out prevention. The
drilling ban is currently in place until 30 November 2010 and normalisation of
drilling activities in the US Gulf of Mexico may take longer due to expected
lengthy permit processes once the ban is lifted.
The midwater market continues to show signs of life with utilisation continuing
to creep higher. Currently the overall utilisation of the fleet is 85% while
the marketed utilisation is now at 93%**. The international jack-up market has
developed into a two tier market over the past quarters, with E&P companies
showing a clear preference for modern build units. Marketed utilisation has
increased from 81% to 84% during the past six months for the overall jack-up
fleet, while utilisation for modern high-spec units has increased up to 96%
currently, from 88% at year-end 2009**. After a worldwide lull in new jack-up
orders from the U.S. drillers since RDC ordered 6 jack-ups in November 2007,
Atwood Oceanics Inc. announced the order of two high-spec jack-ups from PPL
Singapore and Maersk is reportedly in discussions to build two new CJ-70 type
Floating Production Storage & Offloading ("FPSO")
The FPSO market has come back to life after the lull of 2008/9. International
contractors such as SBM, Modec, Teekay and Maersk have guided on strong markets
ahead for the segment. Meanwhile consolidation activity has been seen with the
acquisition of Prosafe Production by BW Offshore to create the second largest
FPSO company in the world. The number of companies involved with FPSOs has been
cut in half from approximately 30 in the 2006 to n2008 period to less than 15
presently which bodes well for established players and the stability of the
The strong price of crude has been very supportive to the Oil Services sector.
While initially the US based companies were negatively impacted by the
moratorium on drilling, over time the market has become much more confident on
the expectation of increased orders for these companies due to increased
regulation e.g. increased decommissioning of platforms and plugging of old
High yield outlook
The high yield market has reopened and the Company has made new investments over
the last few months into issuers including Sevan, Vantage, RDS and Floatel.
These companies are raising finance to fund final yard payments, capital
expenditure and the purchase of completed assets and as such construction risk
is dramatically reduced compared with the financing of early stage new-build
projects. The market views the risk reward of these bonds as attractive as all
have rallied strongly since issue. All the bonds came with double digit fixed
coupons and benefit from premium call clauses. These clauses can prove very
beneficial in the current climate of consolidation where we have seen M&A
activity across the Drilling, FPSO and Oil Services sectors with the tie up of
Rowan/Skeie, BW Offshore/Prosafe and Acergy/Subsea.
For further information, please contact:
Director, Corporate Finance
Arbuthnot Securities Limited
Telephone 020 7012 2000
Lynette Le Provost
Kleinwort Benson (Channel Islands) Fund Services Limited
Telephone 01481 727111
* Pareto Securities Research
** RS Platou Markets Research
All other market data sourced from Bloomberg .
This announcement is not an offer to sell or a solicitation of any offer to buy
any securities in the United States or in any other jurisdiction. Neither this
announcement nor any copy of it may be taken, transmitted or distributed,
directly or indirectly, into the United States, Canada, Australia, the Republic
of Ireland, the Republic of South Africa or Japan or to any national of such
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in any other jurisdictions where its distribution may be restricted by law and
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Source: CQS Rig Finance Fund Ltd via Thomson Reuters ONE