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Spotlight on insolvency - restructuring in US, UK, Norway and Singapore

Introduction

The Field January 2018

In this issue of The Field, Nick March of Skuld Singapore, with assistance from the law firms Royston Rayzor, Rajah & Tann and Steenstrup Stordrange, and Barristers' Chambers 20 Essex Street, looks at some of the options available for an operator facing significant financial challenges and how they work.

Oil prices declined from more than USD 100 per barrel in June 2014 to approximately USD 80 per barrel the day before the November 2014 OPEC meeting. At this meeting, OPEC took the decision to block oil production cuts which sent oil prices plunging and the oil industry spiralling further into depression. Ever since, analysts have made various predictions about when the oil price would rebound and, correlatively, when the offshore service industry would recover. While the oil price has recovered somewhat, and there are signs that the cycle may well be starting to slowly turn, there is still, unfortunately, a great deal of uncertainty and a number of players in difficult circumstances.

This has had a significant impact in a number of the major offshore hubs: In the US, notable players in the offshore industry have gone through insolvency reorganization and have wiped out billions of dollars of debt and gained agreement to defer future repayments, but with heavy dilution of existing shareholder equity. In Singapore, a host of household names have been impacted, making the front page of the business section grim reading for those involved in the industry. Chinese shipyards remain full of speculatively built offshore vessels looking for a home and there are plenty of unwanted offshore drilling units available.

Consequently, more and more parties in the industry are facing the harsh reality of dealing with insolvencies, whether themselves or with their contractual partners. It is therefore imperative that all within the industry have some familiarity with the various proceedings which can be invoked in these circumstances and how matters can develop.

For parties facing the prospect of insolvency proceedings or restructuring, it is also important to consider the implications of that from an insurance perspective. In terms of cover, insolvency is a basis for termination of the insurance cover. However, in situations where there is a close dialogue between the assured (and their brokers) and the insurer as to the process to be followed and the steps being taken, we can work together with a view to maintaining cover (and having cover in place is invariably a contractual requirement) to allow the vessel or units to continue trading, where appropriate.

Contact

Nick March

Senior Vice President, Head of Skuld Singapore
Direct: +65 6438 8010 Mobile: +65 8127 2730 E-mail: