Drydocks World in talks to restructure $1.7bn loan

Company is engaged in 'useful and open discussions' with banks, CEO said.
Drydocks World in talks to restructure $1.7bn loan
DEBT RESTRUCTURING: Drydocks World has said that it is in talks with banks to restructure its $1.7bn debt, that is maturing in Nov 2011. (Getty Images)
By Tamara Walid
Mon 31 May 2010 09:05 PM

Ship and rig builder Drydocks World, a unit of Dubai World, is in talks with banks to restructure $1.7 billion in debt maturing in November next year, its chief executive said on Monday.

Geoff Taylor told Reuters in an interview that the company was engaged in "useful and open discussions" with banks and expected to conclude talks over the next few months.

The shipbuilding arm of Dubai World has a $1.7 billion loan maturing in November 2011. Dubai Drydocks signed a $2.2 billion loan in October 2008, involving 15 lenders, according to Thomson Reuters.

Taylor said: "We are going through a process of discussions with the banks to restructure our $1.7 billion loan ... Obviously the market changes which occurred significantly slowed down our ability to meet our original schedules."

He added: "We are going through a restructuring process."

Drydocks World, although part of Dubai World, is not included in its parent company's debt restructuring proposal. Dubai World reached a deal with its core lenders to restructure $23.5 billion in debt earlier this month.

Orders for oil rig makers and shipbuilders plunged last year as tumbling oil prices forced oil and gas explorers to delay or cancel orders placed in the boom years.

Some analysts turned positive on the sector, following an increase in oil prices, and hopes of big rig building contracts from Brazilian state energy firm Petrobras.

But an overhang of ships after heavy orders placed before the financial crisis, and uncertainty about economic recovery is limiting capital expenditure in the shipping and energy sectors.

Taylor said 2010 was expected to be a relatively tough year.

While the firm and its competitors survived 2009 on the back of orders won in 2008, the forward ordering that carried the order books through is beginning to wear thin, he said, but he did see signs of a pick up in the industry.

The company, which has its major ship and rig building facilities in Southeast Asia, did not receive any orders for 17 months until December last year, said Taylor.

He said: "Between December and now we picked up in the region of $400 million worth of work," adding the market was improving, particularly in offshore, but hasn't been helped by the oil spill in the Gulf of Mexico.

He said: "We've yet to see what consequences that is going to have."

Drydocks World has one yard in Singapore and three in the nearby Indonesian island of Batam and has 14 offshore supply vessels under construction. It competes in the region with the world's top rigbuilders Keppel and Sembcorp Marine.

The company is targeting total revenues of $2 billion this year, with Southeast Asia and the Middle East to generate around $850 million each, he said. It is also looking to increase its 5,600 workforce in Batam by at least 1,000 workers this year.

Taylor said: "The total revenue will be a bit shy of $2 billion, but optimistically could reach this number," adding the projected figure is 20 percent down from last year.

Drydocks is also looking to strengthen its presence in Brazil, eyeing contract wins in the promising market, where it does not have a direct foothold.

Taylor said: "We are very severely reviewing having a representation in Brazil."

He said: "We don't feel that Brazil has enough capacity and capability internally to satisfy the needs."

He added: "There will be an overspill amount of work, and we'd like to have some people there to direct some of that overspill in our direction."

This step would be taken by the third quarter, he said.

Brazilian state oil company Petrobras said on May 14 that it would increase oil output by around 22 percent in 2010 as it begins ramping up production in the vast deep water subsalt fields that have drawn global attention. (Reuters)

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