Polarcus is cancelling the contracts of its entire workforce and has put its vessels up for sale after the company went into provisional liquidation.
Polarcus is cancelling the contracts of its entire workforce and has put its vessels up for sale after the company went into provisional liquidation.
Discussions with lenders and new managers of former subsidiaries to ensure the continuance of current vessel operations, by negotiating a standstill agreement relating to the lenders’ security rights against the company and its subsidiaries, have failed.
‘Such an agreement would have permitted the continuation of current and awarded seismic projects for which the operating A-Class and N-Class vessels have been long committed to various E&P companies globally,’ said Polarcus.
On 2 February Polarcus reported that it had ‘received notice from lenders that they no longer support the continuance of the company’s business relating to the vessels and had been instructed by its creditors to sail its vessels to safe locations in order to initiate a sale process.
‘Polarcus will continue to co-operate with the lenders and the new managers on their instructions to bring current operations safely to an end,’ said Polarcus in a statement. ‘The company is also communicating with its clients in relation to upcoming awards for which the vessels are now no longer available and to seek alternative solutions for them.
‘In light of these circumstances and given their impact on the group’s financial position, notice of termination of employment will shortly be issued to all group employees.’
Meanwhile, a court in the Cayman Islands has appointed joint provisional liquidators charged with restructuring Porlarcus’ debt. David Griffin, Andrew Morrison and Lisa Rickelton of FTI have been authorized to ‘take all necessary steps’ to develop a restructuring of the company’s financial indebtedness with a view to ‘making a compromise or arrangement with the company’s creditors’.
On January 26, Polarcus confirmed a payment default under its working capital facility agreement and halted all payments of interest and amortization to lenders. Six single-ship subsidiary companies (Polarcus Asima AS, Polarcus Alima AS, Polarcus Amani AS, Polarcus Adira AS, Polarcus Nadia AS and Polarcus Naila AS) and Polarcus Shipholding AS each received default and enforcement notices from lenders to transfer all issued shares in each company to the lenders. The lenders also replaced directors of each concern with a nominee of their own.
Polarcus said in a statement: ‘In light of the sustained economic challenges globally, the company has been in detailed discussions with its bank lenders to explore financial solutions. During this period, the lenders consented to the extension of certain financial obligations under the company’s bank facilities until 25 January, 2021. The lenders have now informed the company that no further extension will be granted at this time. A default has been triggered under the working capital facility and, in turn, a cross-default of the group’s other bank facilities and of the convertible bond loan.
‘The company will continue to engage intensively with all affected finance providers. Nevertheless, there can be no assurance or guarantee that any consensual agreement will be reached and no formal standstill agreement is in place between the company and any finance provider.’
Polarcus said that lenders remained open to discuss a standstill period in relation to their remaining claims which would allow the continued operation of the vessel Vyacheslav Tikhonov, owned by Polarcus Selma, a subsidiary of the company. The lenders do not hold any security in either this vessel or this subsidiary. ‘Polarcus will continue to pursue such a standstill agreement in order to bring stability to the remainder of its business,’ it said.
At the start of the year the company reported that its vessel utilization had dropped from 79% in 2019 to 61% in 2020. As of 26 January 2021, the company’s backlog amounting to approximately $130 million.
The last publicly available figures of the company’s workforce in its 2019 annual report showed that Polarcus employed 327 people of which 73% were field employees and 27% office-based. It June 2020 Polarcus reported that it was cutting its workforce by 20%.
During the Covid-19 pandemic, Polarcus has restructured to significantly reduce its cost base. ‘These efforts together with a consistently high level of project performance has enabled the company to maintain market share in an extremely challenging market and to achieve a financial position where operations are cash positive before debt service,’ it said in a statement.
As First Break went to press Polarcus released a statement saying: ‘The board remains focused on pursuing a restructuring of its indebtedness and maintaining the underlying business as a going concern. Discussions between the company and its creditors, including the secured creditors, continue.’
