Asset-rich North Sea businesses are turning to alternative methods of funding their ongoing operations as their market continues to prove challenging, according to lawyers at HBJ Gateley.
Despite a recent recovery in the price of a barrel of crude to above $50, the slump since 2014 has all but ruled out refinancing of bank debt.
According to HBJ Gateley, many firms are mulling their options for unlocking finance after exhausting cash reserves.
Addi Shamash, a partner in HBJ Gateley’s Aberdeen office, said a growing number of businesses were borrowing against their assets in order to protect operations.
She added: “Companies in the North Sea need flexible access to cash so they can stay nimble and are able to respond to a market which remains extremely unpredictable.
“Asset-based lending has long been a good alternative for companies which want more flexible methods of financing than a longer-term debt facility, for example.
“North Sea companies tend to have valuable assets on the balance sheet, which can be used to unlock finance.
“The reality of life in the North Sea is that many companies are coming under pressure with their existing debt facilities, have exhausted their cash reserves and have to find alternatives which will allow them to have a viable future.
“The oil price is recovering but the increase will take time to filter down the supply chain, so alternative methods of finance are a welcome way to protect core business operations in the meantime.”
HBJ Gateley said its Aberdeen office had recently advised on asset-based deals for a number of manufacturing and processing companies.
Ms Shamash added: “Asset-based lending doesn’t have the same stigma it used to, and right now cash is king.
“The North Sea has proven itself time and again that it has the resilience and innovation to weather tough times, and what we’re seeing is a real determination from oil and gas firms that they’ll fight tooth and claw through this current situation.
“Adopting a more flexible mindset to ongoing funding and being open to new ideas is a critical part of how companies endure difficult environments.”
Recommended for you
