Aban Offshore debt rejig in works

Aban Offshore, India’s biggest offshore oil services firm, seems to be working towards managing the huge $3.2 billion debt on its books.

Industry sources suggest that the company management in a meeting in Singapore discussed deferment of debt payments to their Indian lenders ICICI Bank, State Bank of India and Axis Bank.

A private news channel reported that the banks have agreed to defer repayment of the principal amount by two years. This was based on the weak financials of Aban and improving outlook in the rig market, the channel said.

However, DNA could not independently verify this as Aban officials could not be reached for comment.

Aban has an obligation to repay $600 million in FY2010.

The company has an obligation to repay the $150 million convertible bonds by December 2009, which it had issued in Singapore in 2007. Aban’s Singapore unit was expected to eventually list its shares in the Singapore market, which did not materialise.

Morgan Stanley in its report dated July 14 raised Aban’s target price citing improving business and a possible restructuring of its debt.

Mayank Maheshwari and Vinay Jaising of Morgan Stanley in their report said that with the improvement in market sentiment, Aban can also look at qualified institutional placement to raise capital or list Aban Singapore. Shareholder approval has already been sought for both the options.

Another analyst with a domestic brokerage said that the company is not in a position to repay any of the debt due for this year.

“The bond repayment leaves the company practically in no position to service debt and the company is aggressively working towards a restructure.”

Following speculation on debt restructuring, Aban’s stock rose 25% on Tuesday.

Aban, with a strong fleet of 20 drilling vessels, ran into trouble when the oil prices fell below $30 per barrel lowering exploration activities.

This had left seven of Aban’s assets lying idle and four more coming up for contract renewal in the next four months. However, with the crude oil prices rebounding optimism has returned in the E&P sector with more activity especially in Mexico, North Africa and Iran.

Analysts are positive that Aban will be able to position its idle rigs at decent day rates of $120,000-150,000 and get revenue visibility from second half of FY2010.