Aban offshore in debt trouble

The company has total debt of Rs 16,635 cr, most of which was taken during its acquisition of Norway’s Sinvest in 2006.

Aban Offshore, the biggest oil rig company in the country, is all at sea over its huge debt repayment burden. The company, which has a market capitalisation of Rs 5,392 crore (at today’s price on the Bombay Stock Exchange), has a total debt of Rs 16,635 crore, most of which was taken during its acquisition of Norway’s Sinvest in 2006.

The situation has reached a flashpoint, with the Chennai-based drilling firm failing to repay Rs 200 crore of short-term debt recently. Another Rs 1,535 crore of repayment is due this month.

Care Rating, a domestic credit rating agency, last month assigned BB rating to the company’s long-term bank facilities. Double B ratings are considered to offer inadequate safety for timely servicing of debt obligations. The rating revisions factors in the inability of the company to successfully refinance its bullet loans in a timely manner, Care said.

Shares, however, rose 2 per cent to Rs 1,239 on the Bombay Stock Exchange today. Market sources said this is in expectation of banks granting a moratorium on some of its loan facilities.

“The company is most likely to get moratorium on the debt facilities,” said a banker familiar with the developments. State Bank of India, along with other public sector banks, has lent the company that operates 20 rigs for oil exploration. The company could not be reached for comments.

Aban Offshore, which began as a comparatively small manufacturer of pipelines for oil refineries and fertiliser plants, grew to its present size through a series of expansion plans.

Explorations at high costs became unviable when Brent, the benchmark crude oil price, crumbled from a high of over $145 per barrel in July 2008 to just $34 per barrel on December 24 due to the economic slowdown.

This downturn affected the demand for the rigs of the company. Aban Offshore saw as many as seven out of the total 20 rigs becoming idle, weakening its capability to repay the loan.

However, as oil prices recovered, the company has been able to deploy some, barring three which are still idle. Analysts expect these rigs to be deployed by the end of next quarter. Brent has recovered to about $78 per barrel now and this gives a boost to exploration activities.