Mumbai: Promoters of Aban Offshore Ltd have offered to pay up to $600 million in a one-time settlement to 17 banks to which it collectively owes nearly $2 billion, two people aware of the development said.
Banks continue to talk to the company, but are yet to take a final decision, the people cited above said on condition of anonymity. Aban Offshore is among the 28 companies on the Reserve Bank of India’s second list of large corporate defaulters. Banks which lent to these companies must either finalize resolution plans for them or initiate insolvency proceedings at the National Company Law Tribunal (NCLT).
Aban Offshore is the flagship company of Aban group, and provides offshore drilling services to companies engaged in exploration and production of oil and gas. It is the largest private offshore drilling services company in India and is one of the largest in the world. The company had total outstanding debt of more than Rs12,000 crore in FY17.
“The promoters have tied up with external investors to raise $600 million for the settlement and has conveyed that raising any additional capital will not be supported by the company’s current Ebitda levels, which has declined significantly since the time most of the debt was raised," said the first of the two persons cited above. Ebitda is short for earnings before interest, tax, depreciation and amortization, an indicator of operating profitability.
“The banks, meanwhile, are willing to take up to a 50% haircut which translates to around $1 billion as a potential one-time settlement," this person added.
While emails sent to Aban Offshore’s management including company’s managing director Reji Abraham remained unanswered until press time, a spokesperson for State Bank of India ( SBI), one of its lenders, said, “It is a policy of the bank not to comment upon individual accounts and its treatment".
At a consolidated level, Aban Offshore posted a net loss of Rs1,041 crore against revenue of Rs1,777.80 crore for FY17, which was down by almost 50% from Rs3,353.92 crore the year before. Significantly, while the company continues to remain Ebitda-positive (close to Rs921 crore for FY17) it paid finance costs of Rs1,090.49 crore.
“The company’s revenue has declined significantly in the past few years due to declining demand for offshore drilling services due to the fall in oil prices globally," the second person said. “The entry of Chinese drilling rig manufacturers...have further dented the market, as they also provide long-term financing to buyers with down payment as low as $20 million" the person added.
Aban Offshore was jointly incorporated in 1986 by Aban Constructions Pvt. Ltd and iChiles Offshore Inc. (COI), a US-based offshore drilling company. The company and its wholly owned subsidiaries had a total of 18 assets by the end of March 2016 including 15 jack-up rigs, two drill ships and one offshore production unit, according to its latest corporate filings.