Archer Limited
John Fredriksen Doubles Down on Archer With Quarter of $100M Private Share Placement, Equity Backstop Fee, Equitization of Convertible Paratus Loan; New $200M 2L 2027 Bonds to Pay SOFR+5% Cash, 5% PIK
Mon 03/06/2023 12:16 PM
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John Fredriksen’s family office Hemen and Paratus Energy, formerly known as Seadrill New Finance, stand ready to inject new equity into Norwegian well services group Archer, according to a presentation outlining the company’s $560 million refinancing transaction.
Hemen owns around 12.9% of Archer’s pre-new money equity and Paratus controls 15.9% of the shares. Hemen owns around 32% of Paratus.
Archer is taking its existing $563 million debt out at par and deleveraging to $413 million, corresponding to 3.7x over management’s guided 2023 EBITDA of $108 million to $116 million, thanks to the new equity being put in and the equitization of a convertible loan. The group’s loans changed hands in the low-80s in late 2021.
Hemen has indicated “an interest” in subscribing to $25 million of Archer’s $100 million private equity placement, which opened this afternoon and will close tomorrow morning at 7 a.m. GMT. Paratus, which is Archer’s largest current shareholder, has indicated an interest in subscribing to $15.5 million. The CEO and CFO of Archer have confirmed their intention to subscribe to 1 million Norwegian kroner ($95,862) and NOK 400,000, respectively, while board member Jan Erik Klepsland will buy at least NOK 500,000.
Paratus will receive additional equity when it swaps its subordinated $15.9 million loan provided to Archer for new shares at an implied value of $20 million.
On top of the new equity, Archer has agreed on a plan to borrow $260 million from DNB Bank ASA, Skandinaviska Enskilda Banken AB Oslo Branch, or SEB, and SpareBank 1 SR-Bank ASA.
This four-year first lien facility is split in a $150 million term loan, a $100 million RCF and a $10 million guarantee facility with an option to upsize with further $5 million. It will pay SOFR plus a margin between 300 bps and 550 bps, depending on margin grid leverage ratio.
Archer will also issue a new $200 million second-lien bond due shortly after the first-lien facility in 2027 paying SOFR+5% cash and SOFR+5% PIK. The 2027 junior notes will be issued at 98 and feature a $20 million equity fee to backstop parties led by Hemen. The notes also have a 12% pay-if-you-can margin. The bonds will share a security package with the first-lien, subject to an intercreditor agreement. Both instruments will be governed by Norwegian law.
Sources told Reorg in September that a refinancing of Archer’s capital structure could be supported by the presence of Hemen, with DNB and SEB still holding on to their positions in Archer’s loan facility.
DNB Markets, Pareto Securities AS, Sparebank 1 Markets, SEB Oslo Branch and Arctic Securities AS are acting as joint bookrunners for the private placement.
DNB Markets is the financial adviser to Archer in connection with the refinancing. Fulcrum Advisory Partners LLP provided consultancy services to the company in connection with the refinancing. Advokatfirmaet Schjødt AS is Archer’s legal advisor and Advokatfirmaet Wiersholm AS is acting as legal advisors to the Managers.
Presentation
Release
John Fredriksen’s family office Hemen and Paratus Energy, formerly known as Seadrill New Finance, stand ready to inject new equity into Norwegian well services group Archer, according to a presentation outlining the company’s $560 million refinancing transaction.
Hemen owns around 12.9% of Archer’s pre-new money equity and Paratus controls 15.9% of the shares. Hemen owns around 32% of Paratus.
Archer is taking its existing $563 million debt out at par and deleveraging to $413 million, corresponding to 3.7x over management’s guided 2023 EBITDA of $108 million to $116 million, thanks to the new equity being put in and the equitization of a convertible loan. The group’s loans changed hands in the low-80s in late 2021.
Hemen has indicated “an interest” in subscribing to $25 million of Archer’s $100 million private equity placement, which opened this afternoon and will close tomorrow morning at 7 a.m. GMT. Paratus, which is Archer’s largest current shareholder, has indicated an interest in subscribing to $15.5 million. The CEO and CFO of Archer have confirmed their intention to subscribe to 1 million Norwegian kroner ($95,862) and NOK 400,000, respectively, while board member Jan Erik Klepsland will buy at least NOK 500,000.
Paratus will receive additional equity when it swaps its subordinated $15.9 million loan provided to Archer for new shares at an implied value of $20 million.
On top of the new equity, Archer has agreed on a plan to borrow $260 million from DNB Bank ASA, Skandinaviska Enskilda Banken AB Oslo Branch, or SEB, and SpareBank 1 SR-Bank ASA.
This four-year first lien facility is split in a $150 million term loan, a $100 million RCF and a $10 million guarantee facility with an option to upsize with further $5 million. It will pay SOFR plus a margin between 300 bps and 550 bps, depending on margin grid leverage ratio.
Archer will also issue a new $200 million second-lien bond due shortly after the first-lien facility in 2027 paying SOFR+5% cash and SOFR+5% PIK. The 2027 junior notes will be issued at 98 and feature a $20 million equity fee to backstop parties led by Hemen. The notes also have a 12% pay-if-you-can margin. The bonds will share a security package with the first-lien, subject to an intercreditor agreement. Both instruments will be governed by Norwegian law.
Sources told Reorg in September that a refinancing of Archer’s capital structure could be supported by the presence of Hemen, with DNB and SEB still holding on to their positions in Archer’s loan facility.
DNB Markets, Pareto Securities AS, Sparebank 1 Markets, SEB Oslo Branch and Arctic Securities AS are acting as joint bookrunners for the private placement.
DNB Markets is the financial adviser to Archer in connection with the refinancing. Fulcrum Advisory Partners LLP provided consultancy services to the company in connection with the refinancing. Advokatfirmaet Schjødt AS is Archer’s legal advisor and Advokatfirmaet Wiersholm AS is acting as legal advisors to the Managers.
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