COLUMN | Going once, going twice: Bourbon's bank puts part of the fleet into online auction [Offshore Accounts]

Way back in July 2019, the Chinese finance company ICBC Leasing wrote to the French vessel owner Bourbon to demand US$800 million, relating to the sale and leaseback of 46 offshore support vessels from Bourbon's fleet that were in default.

ICBC Leasing demanded the immediate payment of all outstanding rental payments on these vessels up to 2026. This resulted in the immediate suspension of the Bourbon shares, a panicked board meeting, and – on July 25, 2019 – Bourbon Corporation's announcement that it had requested the initiation of reorganisation proceedings in the Commercial Court of Marseilles.

On January 10, 2020, a new parent company, owned by the French banks with 75 per cent of Bourbon's debt, acquired all of Bourbon's assets and became the Bourbon Group's new controlling shareholder.

Alongside the banks, ICBC Leasing and Standard Chartered Bank emerged with stakes of approximately 18 per cent and 10 per cent, respectively, as they swapped some, but not all, of their debts for shared in the company. The former shareholders got nothing.

Five and a half years on, the trauma is still continuing. Bourbon’s founder Jacques de Chateauvieux was removed as CEO and lost all his shares in the company during the restructuring.

His successor as CEO, and other Bourbon senior managers, were found guilty of corruption last year, following the 2012 discovery of a suitcase of money owned by Bourbon’s then tax manager at Marseille airport. They are apparently appealing the convictions.

Vessels have been sold piecemeal as the company has struggled to resolve the competing demands of legacy debts, historic sale and leaseback contracts, the shareholders and the need to place the company on a firm footing going forward.

Other vessels have been placed in lay-up due to a shortage of funds for special surveys and maintenance. The company has had to prioritise servicing its still substantial debts, and to try and sort out the leases on over 30 remaining vessels held by ICBC Leasing, including some of the highest value vessels in the fleet.

Stakeholder conflict has delayed restructuring

American private equity players Fortress and Davidson Kempner took control of the company’s equity in 2024, but Bourbon’s problems remained messy and unresolved.

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 and Chinese banks are especially bureaucratic and uncommercial.

Often the same players were shareholders in Bourbon, legacy debt owners and ongoing leasing contract holders, creating a recipe for confusion and conflict. Making the situation worse is the absolute inflexibility of Chinese state-owned entities to write down their loans and accept credit losses.

Western banks accept that they have made a mistake, take a write-down, and then move on. The Chinese state views credit losses more seriously, and has strong processes to manage such situations.

Rather than negotiate a loss, Chinese state bank rules require assets that cannot be restructured to be sold at auction. Not for nothing did ICBC also become an acronym for "Inflexible Chinese Banking Corporation."

So, now ICBC Leasing has moved to place 14 Bourbon vessels on the www.shipbid.net online auction site in China, the Zhejiang Shipping Exchange. The auction will take place in the middle of July and the sellers are inviting interested bidders to place a deposit into an escrow account, and sign a non-disclosure agreement ahead of inspections.

If you only read one part of the article, read this table!

The table below contains all you need to know about the auction process, the biggest single sale of offshore support vessels since the fleet sales of ENAV to AD Ports, Astro Offshore to the Adani Group and of Atlantic Offshore to Allianz and its partners in MAG Offshore. Obviously, all details are given in good faith without guarantee.

Vessels shaded with the same colours are being sold en bloc together. The en bloc price is the total of the individual vessel prices for the vessels marked as being sold together we understand.

What do we learn from this auction?

All the vessels offered were built in China and all the ships offered are diesel-electric. In both cases this may not be a positive. The Sinopacific Group, which built the vessels for Bourbon, went spectacularly bankrupt in 2017, and its owner Simon Liang was jailed for financial crimes in China after being extradited from Myanmar in 2019.

Mr Liang’s back in the offshore game now, and is rumoured to be interested in buying some of the Bourbon vessels in the auction, although with what funds is not clear, given that other Sinopacific group companies appear to be in default on mortgages to another Chinese bank (EXIM Bank) on some anchor handlers.

Lay-up risks

Unless cared for correctly in lay-up (which is a big “if” in the case of the Bourbon lay-ups), diesel-electric vessels are more complicated and expensive to bring back into service compared to diesel-mechanical vessels. In particular, wiring and electric components may need complete replacement.

Until the buyers take delivery and start the work, it is hard to know, and ICBC certainly is not providing any guarantees or detailed technical information on the work needed. Buyer beware!

In terms of supply and demand, most of these vessels have been in long-term lay-up, some for nearly a decade, and all are in hot, humid locations (oh! throw in some desert dust in the UAE and Africa, too), which encourage corrosion and the degradation of chips and circuit boards.

The cold-stacked vessels will take months, if not years, to reactivate, and millions of dollars of spending. Nobody can say for now with any certainty how much reactivation will cost, or how long it will take.

Photos of sprouting tropical vegetation growing on the back deck of some of the vessels has not served to inspire confidence in the condition of the long-term, laid-up and cold-stacked ships.

Buying these vessels after so long in lay-up is risky for the buyers and the reserve prices are high, given the uncertainties of an expensive reactivation process.

Some of the vessels are rumoured to have had equipment removed to provide spares for sister vessels in service with Bourbon, but what has been cannibalised is not clear from ICBC’s specification sheets, and may not be clear at inspection either (what has gone from within the equipment cabinets and where is that console?). The lead time for dynamic positioning equipment, especially, is long at present.

Bourbon Liberty 100 series' usability questions

In particular, the Bourbon Liberty 100 series platform supply vessels (PSVs) have a bad reputation for build quality. The design is notorious for its lack of stability and operating freeboard, and in the downturn, laid-up ships of this class were selling for the hundreds of thousands, not the millions currently demanded by ICBC.

This type of small PSV is almost technically obsolete, and buyers will likely come from second tier, benign water markets like Mexico, Egypt, Nigeria, Indonesia and the UAE.

Evolution opportunity and challenges

The two Bourbon Evolution 800 series have the potential to be big earners but seem to have reserve prices that are challenging.

Carena Shipyards in Abidjan where the vessels are located has the capability to do the reactivation scope, and recently bought a new floating dock, but it is pricey. Buyers are likely to face the unpalatable choice of paying top dollar in situ to do the work, or paying for the towage or heavy lift ship transport of the ships to a cheaper location like Indonesia, China or Turkey.

Either way, people with knowledge of the ships told me that minimum US$10 million and possibly up to US$20 million would be needed to reactivate them.

“The big boys aren’t interest in the risk,” one broker told me. This broker expected Evolution 801 and Evolution 803 to be sold to smaller players in the subsea space with the patience and risk appetite to spend US$45 million, and have a ship ready for service at the end of 2026 in the expectation of a charter rate of US$70,000 then.

By that time, of course, the first wave of the ocean energy subsea vessels under construction in China will be hitting the market, and many of the speculatively built windfarm commissioning service operation vessels will also be chasing subsea work – a trend we have already reported on with Olympic Notos in Norway and Norwind Gale in Brazil.

Keep Calm and carry on

The only two vessels available for immediate chartering at the two in-service PSVs Bourbon Calm and Bourbon Rainbow. These are the two vessels that will attract the most interest, as they are high-capacity units in a segment of the market where day rates stand at around US$30,000 in international markets.

However, without contracts in place, obtaining debt finance to buy them may be difficult, which will limit the pool of bidders. There would be a logic for Tidewater – the industry leader, which has just refinanced – to buy them. There are no anti-trust issues around asset purchases.

Both ships are also located in markets with strong demand for such large units.

Timing is not great

The timing of the auction doesn’t look great to us.

Yes, the market has improved since the depths of despair in the downturn in 2020 and owners are doing well. However, Tidewater’s first quarter results filing showed how rates for its fleet of 190 PSVs and anchor handlers have softened since 2024.

Tidewater’s quarterly profits were down nine per cent year on year, but up ten per cent over the preceding quarter. It anticipates flat revenues this year.

The company remains profitable, and gross margins remain at 50 per cent, but the market was evidently weaker than the highs of last year, and what the company describes as “leading edge day rates” (which is the current bidding and fixing rates for vessels) were down between 10 and 20 per cent for PSVs compared to the third quarter of 2024.

The Middle East market finally gained some more traction, even as profits fell in the Americas and Europe, with Southeast Asia and West Africa largely flat, depending on the comparison point.

The company’s Chief Commercial Officer made the following comment in the analyst briefing in May:

“The outlook for offshore markets has become increasingly uncertain amid the fast-changing macroeconomic environment in response to recent developments. However, day rates in the broader offshore market generally remain in a strong position versus long-term averages...

"Overall, the outlook for the OSV market has become more complex amidst the increasingly uncertain economic backdrop and volatile energy prices. But the long-term fundamentals we have spoken about on previous calls remain in the boat owners' favour going forward.”

More of the same from Tidewater

Tidewater continues to buy back its own shares, and to pay its senior management large bonuses, even as it has reduced pay and conditions for seafarers from the companies it acquired.

One rule for the C-suite and one rule for the seafarers is a depressing reality of the current maritime industry, despite Tidewater’s seemingly un-ironic slogan of “courage to lead, compassion to care.” The company continues to claim that newbuildings are uneconomic using absolutely discredited figures, even as more and more PSVs are ordered in China.

Last week, Tidewater announced a debt swap designed to reduce the company’s lending costs and extend its loan maturities. It has commenced a private offering of US$650 million in unsecured senior notes due repayment in 2030, which will close just before the Bourbon vessels are auctioned.

The company expects to use the net proceeds from the offering, together with some of its approx. US$350 million of cash on hand to repay in full its existing senior secured term loan and to fund the redemption of both its outstanding 8.50% Senior Secured Bonds due 2026 and its outstanding 10.375% Senior Unsecured Bonds due 2028.

This new debt issuance gives Tidewater a lot more flexibility and lower borrowing costs.

As I have said before, for the industry as a whole, the best outcome would be for Tidewater to buy all 12 Bourbon anchor handlers and PSVs and ostentatiously scrap them, but with the price tags requested by ICBC, this clearly is not going to happen.

What happens next?

What’s interesting is that the auction of these 14 ICBC vessels is only the beginning. There are more than 20 other Bourbon vessels subject to ICBC Leases that could come to auction later. If ICBC achieves the sale of all 14 vessels for their reserve prices or more, then there is no doubt these vessels will likely be on the shipbid.net website for sale later in the year.

The auction of the remainder of the ICBC fleet would pose an existential challenge for Bourbon, as it would then need to shrink its overhead to match the smaller fleet, or find some way of buying the ships itself.  

However, a failure to sell all 14 vessels would be humiliating for ICBC. If it fails to sell all the vessels – and with these reserve prices that cannot be ruled out – then ICBC will have to repeat the process with lower reserve prices until the ships are sold, or reach some agreement with Bourbon to extend the leases on new terms to kick the can down the road.

Sources tell me that the reserve prices were set in conjunction with a leading British brokerage house, which is why they are so unrealistic.

Auctions are uncertain and unpredictable, especially when similar ships are offered in different lots and especially when there are so many unknowns as to the reactivation costs and timings. However, let the action begin, and we’ll see who wins when the online auctioneer’s gavel falls.

Background reading

Tidewater’s May 2025 investor slide deck tells you all you need to know about the PSV and anchor handling market. The transcript of the analysts call has some obvious editing and proofreading mistakes (“crude transfer” is written instead of crew transfer, for instance) but is also worth reading.

Following up on our coverage of the subsea mining sector, research house Iceberg has published an op-ed from a legal expert on the legal implications of the Metals Company going it alone with a US permit and bypassing the United Nations framework for subsea mining. The author Coalter Lathrop has represented sovereign states before the International Court of Justice or the International Tribunal for the Law of the Sea. Click here to read the piece.