Petrofac Secures Lock-Up Deal toward Completion of Fiscal Restructuring

Petrofac Ltd. has signed a lock-up agreement with creditors laying the terms for a financial restructuring that includes new debt and equity.

The new agreement “formalizes the in-principle agreement announced by the Company on 27 September 2024 with certain key stakeholders including an ad hoc group of holders of senior secured notes and certain other senior secured noteholders, which together comprise approximately 57 percent of the senior secured notes”, the Jersey-based engineering company said in a statement Monday.

Noteholders have for several times extended a forbearance agreement with Petrofac withholding themselves from pursuing their legal claims over the company’s failure to pay $29 million in interest.

The lock-up agreement includes committed new funding for Petrofac amounting to $325 million, comprising $194 million of new equity and $131 million of new debt. The new equity issuance is enabled by the ad hoc group of noteholders, new and existing shareholders and an unnamed new investor. The new debt is provided by the ad hoc group of noteholders, other noteholders and the new investor.

“The Company may upsize the new equity issuance by up to US$25m in aggregate prior to the Restructuring Effective Date, and it intends to undertake a retail offering of approximately US$8m in 2025”, Petrofac said.

The agreed restructuring terms also involve the conversion of about $772 million of existing debt into equity, “which will significantly deleverage and strengthen the Group’s balance sheet”, Petrofac said. “Post-Restructuring total gross debt (including new funding) will be approximately US$250m”.

Additionally core clients have agreed on alternative performance security for certain contracts awarded to Petrofac last year and contracts expected to be awarded after the restructuring.

The restructuring also involves “extinguishing certain historical actual and contingent liabilities including, notably, in relation to the Thai Oil Clean Fuels contract”, Petrofac said.

Also agreed is a “transformation plan to formalize the construct of the Group’s E&C, ETP and Asset Solutions delivery units”.

Moreover Petrofac’s board will see changes, including the instalment of a new chair in 2025.

Meanwhile a final agreement has yet to be reached on $72 million of new performance guarantee facilities, which would enable the release of $56 million of cash collateral to Petrofac.

Several conditions need to be met to complete the restructuring, including shareholder approval, regulatory clearance and agreement with guarantee providers to waive defaults resulting from the restructuring, according to the statement.

“The agreement announced today will provide a sustainable financial structure that will support our business plan and allow the Group to move forward with confidence”, said chief executive Tareq Kawash. “Bolstered by our current backlog and pipeline of opportunities, the business is well positioned as a leading provider of critical energy infrastructure.

“We have made good progress in closing out our legacy portfolio of contracts, our new projects are progressing well, we have a refreshed strategy focused on our strengths, with enhanced bidding discipline and project governance”.

Outgoing chair René Médori said, “I look forward to overseeing the conclusion of this process with a view to transitioning my Board duties to a new Chairperson in 2025”.

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