Vantage Drilling considering replacing bank facility with higher-cost term sheet offers

By Jennifer Lanning Drey

Portland, Ore., March 13 - Vantage Drilling Co. is pursuing alternative sources of funding to finance its remaining jackups, which would come at a higher cost than its existing bank facility but would remove risks surrounding its ability to make payments to the shipyards, Douglas Smith, chief financial officer of Vantage, said during its fourth-quarter earnings conference call held Friday.

The company has received term sheet offers on two of the jackups and expects to use the alternative financing on at least one of the units, he said.

Vantage closed on a $440 million bank facility in June but later agreed to restrict borrowings until the level of syndication desired by its bank group could be completed. The amendment restricted $261 million of the $301 million of undrawn availability on the facility.

The company has negotiated an agreement with the shipyard where the jackups are being completed that deferred a significant installment on two of them until June 30 to provide time to address the restrictions.

Vantage expects to have all of the financing issues resolved before the final payment is due, Smith said.

"Given time, we're confident that we can complete the bank financing with the initial banks coming in, but that's a lengthy process, so we're looking at the alternative financing," Smith said.

Vantage ended 2008 with $18.2 million of cash on hand and $139 million borrowed under its bank facility.

The company expects to shift to being cash flow positive from operations in the fourth quarter with the start of its Emerald Driller, which has a two-year contract in Thailand, Smith said.

Vantage believes its current contract backlog ensures a stable base of operating cash flow for many years to come, chief executive officer Paul Bragg said during the call.

Vantage Drilling is a Houston-based offshore drilling contractor.

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