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 through a five-year bond issue, with $US260 million 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 it 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 push back from US lenders comes after US credit ratings agencies Moody's and Standard & Poor's downgraded the company's credit rating 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 after the slump in drilling demand, with the company guiding full-year earnings before interest, tax, depreciation and amortisation of about $US116 million.
Management is slashing costs, although the slump in drilling activity is complicating its efforts.
After speculation over the pressure from US lenders, Boart Longyear sought a trading suspension on the ASX on Friday as it looks to resolve the impasse by the start of trading on Monday.
Several directors this month bought shares in the company at 48¢ or so 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 will emerge.
"The company anticipates activity in the mining sector will remain subdued throughout FY14," Imdex told its shareholders recently, although it has diversified further into the oil and gas sector in a bid to access a stronger earnings stream.
One of the difficulties for Boart Longyear is that it has a sizeable exposure to the gold sector, which accounts for 42 per cent of revenue in the June half.
The slump 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 in the price of the precious commodity after its sustained rise in recent years. The mining industry accounts for nearly all of Boart Longyear's operations, exposing it to the downturn in metal prices.
Boart Longyear's problems come as some players have been able to take advantage of the industry's slump. Five years after selling to AJLucas for $150 million, the Mitchell family is to merge its new drill sector assets into troubled contractor Drill Torque, in which Washington H. Soul Pattinson is a large shareholder.