The British nursery rhyme Three Blind Mice harks back to a more brutal time when children’s songs revelled in the combination of both violence and vermin:
“Three blind mice, three blind mice
See how they run, see how they run
They all ran after the farmer's wife
Who cut off their tails with a carving knife
Did you ever see such a thing in your life
As three blind mice?”
It really is not a Mickey Mouse and Disney kind of tale, but this week, the song inspires us to churn out a trifecta of columns on three offshore companies subject to recent and quite drastic changes.
But rather than the farmer’s wife wielding a carving knife, it is the creditors and shareholders who have been cutting off chunks of the trio.
Our first blind mouse is Bourbon. The French operator of more than one hundred offshore support vessels (OSVs) and the largest fleet of crewboats faces yet another savage reckoning, but from an axe brandished in Beijing rather than from an angry dairywoman.
The troubled company has had a torrid few years ever since aggrieved Chinese finance house ICBC Leasing sent the company letters of demand for over US$800 million in unpaid bareboat fees and interest in the middle of 2019. That precipitated a judicial restructuring in France of what was, at one time, the largest offshore company in the world.
Jacques de Chateauvieux, Bourbon's founder and its largest shareholder, was unceremoniously ejected from the company, and control was handed to the banks that swapped their senior debt for equity in the Marseille-based vessel owner and operator.
On January 10, 2020, SPP, owned by the French banks with 75 per cent of Bourbon's debt, acquired all of Bourbon's assets (including the Bourbon brands) and became the Bourbon Group's new controlling shareholder. Alongside SPP, ICBC Leasing and Standard Chartered Bank emerged with stakes of approximately 18 per cent and 10 per cent, respectively.
More grief followed, with more vessels scrapped or sold, including the large platform supply vessel (PSV) Bourbon Monsoon, built in 2007, which was bought for US$20 million by Norwegian investors last year and promptly sent to Guyana under Bourbon management as MH Monsoon.
Senior members of the company’s management team were found guilty of corruption in mid-2024 following the 2012 discovery of a suitcase of money owned by Bourbon’s then tax manager at Marseille airport. They are now, apparently, appealing their convictions.
In early 2023, we warned of the risk of a disorderly dissolution of Bourbon unless the company could be recapitalised and placed in the hands of long-term investors. Banks make terrible owners for shipping companies.
So, it was reassuring for all that last year, the controlling consortium of French banks sold to American private equity groups Fortress Capital and Davidson Kempner (known colloquially as “DK”), as highlighted in the French business daily Les Echos.
The company moved to shiny new offices and seemed outwardly to be making a fresh start. However, ICBC’s small shareholding was not the end of its claims on Bourbon.
Many historic lease payments remained outstanding from Bourbon, the terms of the leases on many vessels had been violated after the market crashed in 2015, and many of the vessels that ICBC had leased to Bourbon were out of class and unable to fund the payment obligations against them.
So, ICBC has moved to start a process of public online auction to remove a dozen laid-up ships from Bourbon’s control and to sell them to the highest bidder.
The Zhejiang Shipping Exchange’s Shipbid-Professional ship auction platform will be the site of an online auction that is expected to kick off after the May Day long weekend in China. The exchange previously arranged the successful sale of the pipelay barge formerly known as Seven Champion in the Arabian Gulf for over US$95 million, after Subsea7 returned it from bareboat to its Chinese state-owned lessors, presumably in anticipation of the recently announced merger with Saipem.
The exchange says that in 2024 alone, it successfully auctioned more than 100 vessels including dry bulk carriers, chemical tankers, containerships, Ro-Ros, and offshore vessels and that the annual transaction value of vessel assets exceeded approximately US$1.4 billion.
Nice to see a Chinese auction site actually advertising something Baird Maritime readers might want to buy, at last (rather than polyester garments and fast fashion).
Twelve Bourbon vessels, ranging from two long laid-up subsea support vessels in Abidjan, Bourbon Evolution 801 and 803, to four smaller diesel-electric Bourbon Liberty 100 series PSVs, will be offered for auction. This is a move that will deprive Bourbon of around 10 per cent of its offshore fleet, though the vessels are not working.
This handy table provided by the Shipping Exchange sets out the vessels offered, which are scattered around the world and have been laid up for time periods ranging from a few months (AHTS Bourbon Morrakot, Bourbon Liberty 206 and PSV Bourbon Horus) to eight or nine years (Bourbon Liberty 157 and AHTS Bourbon Liberty 202 and 203):
Whilst these vessels are going to require months and months of work and millions of dollars to bring back into service, there are a number of important consequences from ICBC’s decision.
Firstly, it increases the prospect of the ships being reactivated and returned to the market. Bourbon has lacked the capital to invest in renovating these vessels.
The French player remains cash-strapped and has struggled with its need to pay back its debt and its leases. So, the ships have sat blacked out and cold stacked.
Photos from the tropics have suggested that lush vegetation has sprouted on the back decks of many of the ships, perhaps offering the new buyers to chance to harvest their own mangoes and papaya grown on the vessels before they start work on the dockings and repairs.
It is highly unlikely that the new buyers will buy the ships for what will surely be millions of dollars, and then leave them to continue to rot and rust. Instead, with the market valuing the Evolution 800 series at probably around US$50 million to US$60 million each, if they were in class and operational, there will be moves to bring them back to service.
This likely increases active supply – unless Tidewater buys the ships and ostentatiously scraps them, which would be a majorly positive market signal, and cheaper than doing the newbuilds that Tidewater has long resisted.
If Tidewater wanted to send a powerful signal of its commitment to support the market, it could buy the ten anchor handlers and PSVs from Bourbon and just scrap them.
This would probably provide higher long-term value to the company than the dubious share buybacks that the company has performed, typically at the top of the market. The company’s board authorised it to buy back over US$90 million of its own shares at the end of last month. Let’s see how quickly it can blow that cash.
Despite the frequent use of the picture of the Tidewater Enabler in coverage of the company, Tidewater no longer operates subsea vessels like the two Bourbon Evolution 800 series vessels (but maybe it should again, and this could be an opportunity…).
Buying and scrapping the ICBC laid-up fleet would undoubtedly represent better value for Tidewater’s shareholders than buying its own shares at over US$80 each and then watching them drop to US$40 where they stand today, which is precisely what happened in 2024.
Scrapping of long time laid-up vessels recently came back to prominence as the realisation that 2025 might be a “pause” year for offshore.
Last month, Noble Corporation announced plans to divest the cold-stacked drillships Pacific Meltem and Pacific Scirocco “in order to eliminate costs related to these units and prioritise resources on the existing marketed fleet. The company intends to divest these units in a manner [that] would effectively retire them permanently from drilling operation, including potentially scrapping the units."
Later in the month, Prosafe announced it was selling the 2005-built semi-submersible DP floatel Safe Concordia for scrap for US$5 million. The drilling market is watching to see whether the patient board of Transocean will continue to be as patient with its inventory of laid-up, cold-stacked drillships in Greece.
Unfortunately, there is no upside to ICBC by scrapping the ships, which would break Chinese law, and so they will be sold.
The second consequence is that the ICBC auction removes potential upside from Bourbon. Its fleet shrinks and there is a reduced possibility of spending, say, US$5 million apiece, to reactivate some of the PSVs and AHTS to get a one-year payback on that investment.
The company in its current form doesn’t have the cash (yet) to invest in newbuilds, so losing the upside of reactivating the laid-up vessels and chartering them hits future potential cash flows.
Finally, there is the worst-case scenario, the third possible consequence of this process. Has ICBC finally lost patience with Bourbon, ten years after the latter started to default on its leases when the market crashed?
This worst-case scenario is that not only does ICBC sell off these laid-up vessels, but then it also auctions off the operational and in-service vessels that it still owns in the Bourbon fleet. What these ships are, and how many of them there are, has not been publicly disclosed at this time, to my knowledge.
Bourbon’s new shareholders are probably working hard to prevent that from happening. Losing twelve laid-up ships is akin to having Bourbon’s tail cut off.
It’s painful and annoying, but not fatal. If ICBC takes the knife elsewhere to the active fleet, that might be deadly.
Let’s see how this runs.