Norwegian offshore drilling contractor
) declared that it has launched a new voluntary incentive offer for
converting any or all of its $650 million worth convertible bond
into shares. The bond - with a 3.375% interest rate − is scheduled
to mature by 2017. The company revealed that more than 60.0% of its
bondholders are in favor of the conversion and have already made
SeaDrill added that the bondholders willing to exercise their
conversion right will likely get 3,612 of its ordinary shares per
$100,000 principal of the bond they hold. Moreover, the bondholders
will also get an extra cash payment of $11,840 for every $100,000
principal value. The accrued interest of the bond between Apr 27
and Jul 28 will also be added to the bondholders' kitty.
SeaDrill had announced the bond-to-share conversion on Jul 8, 2014
along with another $1.0 billion worth convertible bond offering,
which was expected to mature by 2019. The annual coupon of the $1.0
billion bond, was declared in the range of 2.00-2.50%, is supposed
to be paid semi annually.
Incidentally, the twin offerings got an unfavorable investor
reaction post announcement. Shares of SeaDrill had dropped over
5.0% on the day as investors feared liquidity concerns owing to the
huge $1.0 billion debt burden that the company was planning to take
on its shoulders. Shareholders were tensed as this bond would
result in considerable cash outflow for the coupon payment that
would in turn hurt their returns to a great extent.
Keeping investor skepticism in mind, SeaDrill had cancelled both
the offers on Jul 9. The $650 million conversion, however, has been
Hamilton, Bermuda-based SeaDrill currently carries a Zacks Rank #5
(Strong Sell), which implies that it is expected to significantly
underperform the broader U.S. market over the next one to three
Meanwhile, one can look at better-ranked players in the same
Helmerich & Payne Inc.
Nabors Industries Ltd.
Patterson-UTI Energy Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
SEADRILL LTD (SDRL): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis
HELMERICH&PAYNE (HP): Free Stock Analysis
NABORS IND (NBR): Free Stock Analysis Report
To read this article on Zacks.com click here.