Seadrill Bonds Sold by Norwegian Fund as Cleanup Seen Too Messy

  • Long and complicated restructuring demanding for bondholders
  • Possible to find value in other Norway oil service sector debt

The debt restructuring of offshore driller Seadrill Ltd. is becoming more of a hassle than it’s worth for some junk bond investors.

Holberg Kreditt has sold all its Seadrill bonds, according to Gunnar Torgersen, chief investment officer at Bergen, Norway-based Holberg Fondsforvaltning AS. It disposed of about $56 million of the 2017 bond in April and May after adding to the position as recently as February.

“It’s a very complicated restructuring they have to go through, where the outcomes are very wide,” Torgersen, who oversees 24 billion kroner ($3 billion), said in an interview last week. “How much shareholders, banks and bondholders must give is very unforeseeable and complicated. That complexity made us pull back from this process.”

Norway’s junk bond market, Scandinavia’s biggest, has come to a near standstill after the collapse in crude prices. Bondholders are coping with restructurings as oil service companies struggle with a slump in revenue. Seadrill, the offshore driller with the biggest debt load, in April reached a deal with banks to extend some credit lines and has since agreed with bondholders twice to swap bonds for equity.

“The process takes longer than you would think,” Torgersen said. “Originally, the company said they should reach their goal by summer. Then they told the market that it will take longer so we felt that the uncertainty about the resolutions was bigger.”

The fund manager has recently been involved in its fair share of restructuring, including BW Offshore Ltd., Teekay Offshore Partners LP and Prosafe SE, according to Torgersen.

Train Leaving

“It’s a question of resources,” he said. “How much time are we going to spend on the issuers we hold. We shouldn’t spend much time on restructurings. We have a rather strict mandate.”

While Holberg Kreditt has decreased its exposure to oil and offshore in the past months, Torgersen still sees value in the debt of Aker Solutions ASA and Det Norske Oljeselskap ASA.

“The main part of the rally in that sector is probably behind us,” he said. “But the levels that we get paid for BB in Norwegian offshore still offers good value. The train has not passed but it has left the platform. You need to be selective from company to company.”

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