| dc.description.abstract | This paper examines the role of banks in the financial restructurings of Norwegian offshore
companies following the steep fall in oil prices starting in June 2014. Developing the work of
Torstensen and Rasmussen (2017), we delve into the resolution of financial distress in 11 OSV
companies from 2015 to 2018, aiming to understand the role of banks as main creditors in
financial restructurings. Further, based on insight from key stakeholders, we discuss the
outlook for bank behaviour in future restructurings. Analysing the restructuring outcomes, we
show how bank debt is practically unchanged from the level prior to the restructurings. Instead
of nominal reductions, the banks have opted to amend and extend current loan terms. Although
partially compensated through debt converted to equity and cash redemptions, bondholders
have seen their claims being greatly reduced. Moreover, in most cases, equity infusions came
in form of private placements from the largest existing owners, significantly diluting other
shareholders. As such, banks have favoured large existing shareholders at the expense of other
unsecured claimholders, violating the assumption of absolute priority. As we believe the
current decline in the OSV industry is just as much a structural crisis as it is a cyclical
downturn, we argue that it is essential that banks opt for scrapping of vessels and enhanced
industry consolidation when resolving financial distress in the future. Nevertheless, recent
restructurings provide indications of banks being neither prepared nor willing to address the
fundamental issue of overcapacity in the market. | en_US |
