Norwegian billionaires head for showdown with supply creditors

[OSLO] Billionaires Kjell Inge Rokke and John Fredriksen used the oil-market downturn to force a series of mergers on Norway's struggling offshore supply industry. Now, they're heading for a final showdown with creditors.

Solstad Offshore ASA, the company resulting from deals orchestrated by Rokke and Fredriksen, said on Monday it would start negotiations with lenders and other stakeholders to improve the company's liquidity. The winter season ahead is expected to be "challenging" for Solstad, which had 31.1 billion kroner (S$5.2 billion) in liabilities at the end of the second quarter.

The market for supply vessels to offshore platforms was one of the worst hit after crude prices collapsed in 2014. Oil companies cut spending, reducing demand at the same time as a decade of booming investments had inflated supply. The industry was ripe for consolidation, and Mr Rokke and Mr Fredriksen pounced.

Mr Rokke's investment company, Aker ASA, first took control of Solstad, before forcing a merger on smaller rival REM Offshore ASA in July 2016. Half a year later, Mr Rokke and Mr Fredriksen jumped in with fresh capital for Farstad Shipping ASA, restructuring the company and folding it into Solstad along with Fredriksen's Deep Sea Supply Plc.

The merger created one of the world's biggest supply companies and was supposed to shield the business through the downturn, but market realities have proven hard to overcome. After Solstad said it was starting debt negotiations on Monday, the stock tumbled as much as 27 per cent, the most since it was listed in 1997. It traded 20 per cent lower at 4.10 kroner apiece as of 3.29 pm, the lowest since Nov 30.

Rokke's Aker and Fredriksen's Hemen Holdings Ltd own 20 per cent and 16 per cent of Solstad, respectively. Their shares has plunged more than 70 per cent in value since the three-way merger was announced. Yet the two billionaires still acquired their position at historical lows, and are now strategically positioned to pressure banks and bondholders into accepting significant term changes in return for offering more fresh money.

Solstad Chief Executive Officer Lars Peder Solstad declined to provide any details of a potential solution for the company, including the role Aker and Hemen could play. An associate of Fredriksen's declined to comment, and a spokesman for Aker didn't immediately reply to a call.

While Rokke has seized on the downturn by building his oil company Aker BP ASA, Fredriksen has been engulfed in the demanding restructuring of his drilling company Seadrill Ltd. He'll have more time to focus on Solstad now, after striking a deal with creditors and pulling Seadrill out of Chapter 11 in July.

BLOOMBERG