* Seadrill faces debt-to-equity conversion; Chapter 11
* Billionaire John Fredriksen risks dilution of stake
* They need to swallow bitter pill and do it -investor
* Fredriksen's Frontline meanwhile continues expansion
* Seadrill shares fall 14 pct, Frontline rises 5.7 pct
(Adds analysts, background, share price reaction)
By Gwladys Fouche and Ole Petter Skonnord
OSLO, Feb 28 Rig firm Seadrill,
battling with $14 billion in debt and liabilities, said on
Tuesday it may have to file for Chapter 11 bankruptcy protection
if it fails to reach a restructuring agreement with its lenders,
sending its shares down 14 percent.
Once the crown jewel in the empire of shipping tycoon John
Fredriksen, Oslo-listed Seadrill's shares have fallen 92 percent
in the past three years as plunging crude prices and drastic
spending cuts by oil companies hammered rig rates.
Seadrill's problems mirror those of another Fredriksen
business, tanker firm Frontline, which had to be
rescued in 2012 after a prolonged slump in rates by Hemen
Holding, which manages his holdings in the listed companies he
The Norwegian-born billionaire announced plans on Tuesday to
beef up the tanker business and update its fleet while prices
for vessels are low to position it for an expected recovery in
rates from 2018.
But the scale of Seadrill's liabilities dwarf those of
Frontline, and the rig company said it would be challenging to
find a "fully consensual agreement" before an April 30 deadline.
More than 40 banks are involved, in addition to bondholders.
"Feedback from certain stakeholders and potential new money
providers ... indicate that a comprehensive and consensual
agreement will likely require conversion of our bonds to
equity," it said in a statement.
In a plan made public in January, Seadrill had said it aimed
to raise $1 billion in new capital, extend bank maturities,
reduce fixed amortisation and extend maturities of unsecured
But the company has so far failed to reach a deal on these
terms, and Fredriksen, who holds a 23.6 percent stake in
Frontline, now risks diluting his shareholding.
"It is a bitter pill to swallow but they need to do it,"
said one investor in Fredriksen companies, who declined to be
If it can't reach an agreement, Seadrill was preparing
various contingency plans, including potential schemes of
arrangement or Chapter 11 proceedings, the company said.
At 1203 GMT Seadrill shares were down 14 percent at 14.47
Norwegian crowns, while Frontline's stock was up 5.7 percent at
Frontline said it had made a higher and final offer for
rival DHT Holdings, in which it holds a 16 percent
stake, adding that the bid was rejected. It also said it plans
to buy two very large crude carriers (VLCCs) for $77.5 each from
South Korea's DSME.
Brokerage Pareto Securities said the deal demonstrated
Frontline's ability to take advantage of low asset prices during
a market downturn.
According to an estimate by business magazine Kapital, which
tracks the wealth of rich Norwegians, John Fredriksen, aged 72,
had a net worth of some 92 billion Norwegian crowns ($11
billion) in 2016.
His two daughters have increasingly become involved in the
running of his businesses in recent years.
(Additional reporting by Terje Solsvik; Editing by Louise