Sevan avoids record bankruptcy
September 30, 2011
A Canadian-based shipping firm that was founded in California by a Danish emigrant has ridden to the rescue of ailing Norwegian offshore firm Sevan Marine, saving it from what could have been Norway’s largest bankruptcy ever. Teekay Corp of Vancouver will buy three floating production storage and offloading units (FPSOs) from Sevan and invest in a recapitalized Sevan Marine ASA.
The deal is a huge relief for Arendal-based Sevan, its employees and industrialist Jens Ulltveit-Moe, one of Norway’s otherwise most successful businessmen and Sevan Marine’s chairman. He’s been working for months to bring Sevan out of a crisis caused by an unsuccessful stock issue, cost overruns on one of Sevan’s FPSOs and acute liquidity problems.
Ulltveit-Moe earier this week had threatened increasingly impatient creditors that Sevan would head into bankruptcy court. With debts of around NOK 5.4 billion and a total share value of only NOK 160 million, it would have ranked as Norway’s biggest bankruptcy ever. Trading of Sevan shares was halted on Wednesday.
Now Teekay, which has done big business with Sevan before, will acquire Sevan’s three FPSO units Hummingbird, Piranema and Voyageur upon completion of the Voyageur’s upgrade, along with the units’ charter contracts.
Teekay, according to a press release issued Friday by Sevan, will also finance completion of the Sevan Voyageur’s upgrade, subscribe to a new issue of Sevan Marine shares “to acquire a significant ownership position in a recapitalized Sevan Marine,” and enter into a cooperation agreement to acquire future FPSO projects developed by Sevan Marine. The Arendal company will continue to be traded on the Oslo Stock Exchange.
Sevan chief executive Carl Lieungh said he was “pleased” to announce what amounts to a long-term restructuring of Sevan Marine. “We believe the proposed transaction with Teekay represents a good solution for all stakeholders of Sevan Marine including our employees and customers,” Lieungh said. It will also allow for growth, he said.
Teekay President Peter Evensen said the deal reflects Teekay’s “confidence in Sevan’s strong offshore project development expertise.” He said it also will give Teekay “an enhanced pipeline” of FPSO growth opportunities.
The unusual offshore units that Sevan develops and operates are cylindrical vessels that are used to extract and store oil, hence the “floating production storage and offloading”name and FPSO acronym. Sevan currently has two of the hugely expensive FPSOs in production, a third on contract and two more under construction. Its drilling operations were spun off into another firm, Sevan Drilling.
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