(Idea) Borr Drilling - Yikes
My previous coverage of Borr Drilling (BORR) favored waiting to buy the shares until jackup market conditions improved. An excerpt is below.
“Instead of rushing out and buying Borr stock at its current depressed level, I believe an investor would be better served by waiting for more concrete signs of improvement in the jackup market. At that point, a small long-term commitment to the shares may make sense. By patiently waiting to buy, an investor may have to sacrifice some upside if events turn favorable. But the increased probability of a successful outcome and lower probability of a disaster afforded by being patient will improve risk-adjusted return prospects even if upside is reduced.”
Unfortunately, the jackup market deteriorated since then, while Borr's year-ahead contract coverage is lacking, and dayrates are falling instead of increasing.
Moreover, I believe recent events strengthen the case for investors to avoid Borr in favor of other offshore names that offer similar upside with lower risk.
Capital Raise Buys Time, But at a High Cost
On July 2, Borr announced an increase in its senior revolving credit facility commitment from $150 million to $200 million. Borr also secured an additional $35 million revolving credit facility, pending a $100 million equity raise of 50 million shares, which will be made in two tranches.
The equity raise was well received. Borr received orders for 50 million shares at $2.05 each, exceeding the expected $2.00. The offering generated $102.5 million. Borr has completed the sale of the first 30 million shares. The remaining 20 million shares are expected to be issued around August 7 if approved by shareholders at a special meeting scheduled for August 6.
Management and members of the board of directors stepped up and purchased 11.3 million shares, representing 22.6% of the offering.
Combined with covenant relief, the financing will increase Borr’s available liquidity to approximately $200 million.
Boor’s shares have traded roughly flat since the financing was announced, implying that the move was priced into the stock in advance of the offering. Once completed, the equity issuance will dilute existing Borr shareholders by approximately 20%.
This capital raise takes potential liquidity issues off the table. The additional liquidity and covenant relief it will provide eliminate concerns about Borr’s ability to meet its upcoming $134.7 million bond amortization. It also eases concerns about the company’s ability to make its 2026 amortization and interest payments, which are equal to 2025 levels.
The capital raise also eliminates the risk that the company will be forced to sell assets into a weak jackup market at below-average prices over the next few quarters.
Interestingly, Borr also alluded to “potential value-added growth opportunities” in its press release, as shown below.
Source: Borr Drilling press release, July 2, 2025.
The company may be entertaining bids from potential suitors, though few offshore drillers are likely to be comfortable taking on Borr’s $2.35 billion in long-term debt in such a weak jackup market. The current weakness prevents potential asset sales from being a viable option for a bidder to reduce debt assumed in an acquisition.