KCA Deutag adds to board ahead of more debt talks

LONDON Oct 4 (Reuters) - British-based oil drilling contractor KCA Deutag has appointed four restructuring experts as directors, just as debt renegotiation talks are set to intensify, sources close to the negotiations said.

KCA Deutag, owned by oil industry services company Abbot Group [TRBTAG.UL] and trying to reach an agreement with lenders on $2.16 billion of debt to avoid a covenant breach, announced the new non-executives on Monday.

The new directors include Peter Bloxham, a former partner at law firm Freshfield Bruckhaus Deringer who worked on the restructuring of Eurotunnel and Bob Ellis, who is also a non-executive director of London soccer club West Ham.

Chris Hughes and Dean Merritt, respectively the co-founder and a partner of advisory firm Talbot Hughes McKillop, have also been appointed.

The move to bring in independent directors has been led by non-executive chairman Tim Summers, the ex-chief executive of Anglo-Russian oil group TNK-BP [TNKBP.UL] who joined KCA Deutag in January, one source familiar with the situation said.

The appointments would now help steer KCA Deutag through tough restructuring negotiations, which look set to step up in the next month, two other sources close to the lenders said.

"Things are about to get a lot hotter," said one of the sources.

"There are some key dates coming up, and those will be just the beginning of discussions. This is going to run for a while," the source said.

After failing to raise a $500 million high yield bond in August, which would have helped KCA Deutag tackle its debt burden, the company is under pressure to secure a cash injection and avoid a covenant breach on Nov. 15 on its junior-ranking mezzanine debt.

"The company has engaged with all its lenders and is pursuing constructive talks with all its stakeholders," a spokeswoman for KCA Deutag said on Monday.

Mezzanine lenders, which include Blackrock, Goldentree and Wamco, have hired Houlihan Lokey as a restructuring advisor and Ropes and Gray for legal support, according to the sources. Morgan Stanley and Clifford Chance are advising the company.

Previous proposals by private equity owner First Reserve to put new money into the group have stalled [ID:nLDE6820XR]. After an initial meeting in September, lenders are waiting for an independent business review on Oct. 8 to prepare for their next move, the sources said. (Reporting by Sarah White; Editing by Greg Mahlich)