Bankers Trust Co. is syndicating a $100 million facility for Texas-based Marine Drilling Co.
The credit, due in early January, is one of several coming to market as a wave of consolidation sweeps the offshore oil drilling industry.
Demand for offshore facilities, and the day rates paid to their owners by the oil companies that contract them, are reaching new highs. Day rates have hit as high as $130,000, double the level of a year ago.
"After a 10-year period where the industry was characterized by overcapacity and low day rates, it is starting to recover fairly dramatically," said Bill Hughes, a specialist in energy and media syndications at Bankers Trust.
Marine Drilling provides offshore drilling services for independent and major oil and gas companies. The company owns and operates 14 rigs.
It was one of six offshore drilling companies whose stock was recently upgraded by Mark S. Urness, oil service analyst with Salomon Brothers. The other firms are Diamond Offshore Drilling Inc., Falcon Drilling Inc., Noble Drilling Corp., Reading & Bates Corp. and Transocean Offshore Inc.
Texas-based Sonat Offshore Drilling merged last September with a Norwegian firm, Transocean ASA, in a $1.5 billion cash and stock deal forming Transocean Offshore. Last December, Diamond paid $575 million in stock and assumed debt for Arethusa Off-Shore Ltd., another Texas-based drilling concern.
There is still plenty of room left for consolidation in the industry through bank-financed M&A activity, said Mr. Hughes. Among the remaining companies, "most are virtually debt-free, because their balance sheets were cleaned up in the last industry downturn, in 1986."
Upcoming industry deals syndicated by Bankers Trust will include the $100 million facility for Marine Drilling, another $100 million credit for Global Marine Corp., and a $200 million repriced facility for Diamond Offshore.
The Marine Drilling credit is a three-year revolver with commitment fee of 30 basis points. Pricing is a spread range of 75 to 125 basis points over the London interbank offered rate tied to capitalization levels. Repayment is scheduled for 16 equal quarterly installments commencing March 31, 2000.
Marine Drilling will use the capital to refinance $10 million of existing debt and finance the acquisition and upgrading of offshore rigs.
Bankers Trust hopes to lead more of the sector's deals as consolidation continues. "We've really had a focus on this sector over the last couple of years," said Mr. Hughes.
