Banks have held ‘difficult conversations’ with North Sea firms – Nimmo

The UK head of restructuring for KPMG has spoken of the “difficult conversations” lenders to the oil and gas sector have opened with clients since the start of 2016.

The talks were sparked as fears that the industry’s current malaise is likely to continue took hold, Blair Nimmo of the ‘big four’ firm has said.

Mr Nimmo, who was formerly KPMG’s head of restructuring in Scotland before being promoted earlier this year, explained that lenders’ attitudes switched from “passive supportive”, which has resulted in “a significant number of corporate banking customers having their accounts transferred into the restructuring arms of the banks”.

Mr Nimmo’s team has handled at least three major adminstrations in the north and north-east since the start of the year, and he said: “With earnings projections now tracking substantially lower against capital structures that were founded in very different times, covenant resets, capital repayment holidays and wholesale balance sheet restructurings are likely to feature fairly high on the wish-list for some in the near future. In many respects this represents the hidden challenge for the industry.”

KPMG has been involved in selling assets of failed firms including SeaEnergy, Enterprise Engineering Services and the Port of Ardersier in recent months. But he said that while the outlook for the sector is “tough it is not without hope”.

He said: “Clients who are navigating these difficult conversations and pitching their prospects in a well thought through fashion are finding continued appetite for support amongst lenders.

“There also appears to be a fair appetite for investment in stressed and distressed businesses so insolvency does not necessarily equal the end of the road for all those involved.

“Businesses, including those that are succeeding in trading successfully – and many are – also need to be maintaining a high state of vigilance and contingency planning in relation to the less obvious challenges.

“Companies need to model the domino effect that could flow from the failure of an operator, the cancellation or deferment of a major project, or the failure of a major customer or supplier alongside the more easily foreseen impacts of contractor cuts or further supply chain reductions.”