The clock is ticking on contract driller Boart Longyear's financial viability, with US lenders pushing back against conditions of a critical fund-raising aimed at providing the troubled company with breathing space.
Boart Longyear is seeking to raise $US300 million ($317 million) through a five-year bond issue, with $US260 million of this via secured debt and the balance unsecured.
However, prospective lenders of the unsecured portion of the debt are wary of the company's near-term prospects, and are believed to be trying to force the company to provide security over the entire raising. But this threatens to jeopardise security provided for existing debt on issue, complicating the company's fund-raising options.
The pushback from US lenders come in the wake of US credit ratings agencies Moody's and Standard and Poor's downgrading the company's credit rating earlier this month, which put a cloud over the driller's near fund-raising prospects.
Late last month, Boart Longyear reported a June half net loss of $329 million in the wake of the slump in drilling demand, with the company providing guidance for full-year earnings before interest, tax, depreciation and amortisation of about $US116 million.
Management is in the process of slashing costs, although the slump in drilling activity is complicating their efforts.
In the wake of speculation over the pressure from US lenders, Boart Longyear sought a trading suspension on the ASX Friday, as it seeks to resolve the impasse by the start of sharemarket trading on Monday.
Earlier this month, several directors bought shares in the company at about 48¢ a share. It last traded at 49¢. Others with an exposure to the sector, such as Imdex, have flagged continued sluggish demand before any upturn could emerge.'
"The company anticipates activity in the mining sector will remain subdued throughout FY14," Imdex told its shareholders recently.
One of the difficulties for Boart Longyear is that it has a sizeable exposure to the gold sector, which accounted for 42 per net of revenue in the June half.
The fall in the gold price has prompted gold miners and explorers to slash spending in a bid to conserve cash, amid wariness over the outlook for further declines.
The problems that have beset Boart Longyear come as some canny small players have been able to take advantage of the industry's slump.
Five years after selling to A.J. Lucas for $150 million, the Mitchell family is to merge its new drill sector assets into contractor Drill Torque, in which Washington H. Soul Pattinson is a shareholder.