Petrofac Secures Future with $325 Million Injection and Debt-to-Equity Restructuring

December 23, 2024 09:07 PM AEDT | By Team Kalkine Media

Petrofac Secures Future with $325 Million Injection and Debt-to-Equity Restructuring — Image source: Shutterstock

New Funding and Debt Conversion

The restructuring, agreed with a group of senior secured noteholders (Ad Hoc Group) and a new investor, involves a substantial capital injection and a debt overhaul:

$194 Million in New Equity: A fresh equity raise forms part of the $325 million funding package.
Debt-to-Equity Conversion: $772 million of existing debt will be converted into new equity, significantly lightening Petrofac’s financial obligations.
Reduced Debt Levels: The restructuring leaves Petrofac with gross debt of approximately $250 million, positioning the company for greater financial stability.

This plan is designed to alleviate the group’s immediate financial pressures and safeguard its 8,000-strong workforce while maintaining operational continuity.

Impact on Shareholders

While the restructuring offers a lifeline for the company, it comes at a cost to existing shareholders, who will experience material dilution. Despite this, shareholders will retain a stake in the newly refinanced Petrofac, ensuring some level of participation in its future.

Leadership Commentary

Chairman René Médori highlighted the importance of the agreement in providing stability to the business:
“We are pleased to have announced today a deal with creditors and other stakeholders which will materially strengthen Petrofac’s financial position. This financial restructuring will mark a new beginning for Petrofac.”

The board underscored the necessity of the plan, describing it as the "best available outcome" for employees, stakeholders, and the company’s broader ecosystem.

Market Reaction and Outlook

Despite the positive implications of the restructuring for Petrofac's long-term viability, shares fell 16% to 8.57p following the announcement. The decline reflects market concerns over shareholder dilution and the challenges inherent in the restructuring process.

However, the company views this development as a critical milestone, enabling it to focus on its core operations and chart a course for recovery. The restructuring provides Petrofac with a more manageable debt profile and positions it to rebuild its reputation and financial standing in a competitive market.

As Petrofac embarks on this new chapter, the successful implementation of its restructuring plan will be pivotal in restoring confidence among stakeholders and ensuring sustainable growth in the years ahead.

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