Borr Drilling is a mid-cap Norwegian listed owner of shallow water drilling rigs, and we see significant upside potential. The fundamentals have improved, with run-rate EBITDA increasing from approximately $100 million to $500 million. Despite the share price lagging these developments, we believe the market is undervaluing Borr due to its position in a capital cycle investment. The oversupply in the industry is being addressed, and rig rates are expected to rise back to long-run averages, driven by declining supply and stable capex budgets from major developers. Our estimate of fair value is about 3x the current price, indicating a strong investment opportunity.

The Fund initiated positions in Borr Drilling Ltd, an international offshore shallow-water drilling contractor, during the fiscal year.

Borr Drilling Ltd has shown strong performance with a total return of 35.1%, contributing 0.2% to total Fund returns. The Fund has initiated a position in Borr Drilling, previously holding a convertible bond, indicating confidence in its potential. The manager believes there is substantial upside to the company's risk-adjusted intrinsic value, aligning with the Fund's strategy of investing in undervalued companies. This reflects a positive outlook on Borr Drilling's growth prospects in the offshore oil production sector.

Borr Drilling is our mid-cap, Norwegian listed owner of shallow water drilling rigs and is one of three special situations investments for Highwood. Since the shares are down a further 50% to $1.80 each due to a weakening market for day rates on shallow water jack up rigs, I continue to believe this will reverse. Management and the board are doing the right things to maintain balance sheet flexibility. We own these assets at a larger discount to their value, and any realistic assessment of the through cycle cash flow they are likely to generate indicates that value is in plain sight. It requires patience and behavioral discipline to capture the substantial upside on offer.

Borr Drilling, the Bermudan domiciled owner of 24 modern shallow water jack-up drill rigs, is positioned well with a leveraged capital structure expected to pay down via strong free cash flow. The company is benefiting from favorable market conditions, which are likely to enhance its operational performance and financial stability. The manager believes that Borr Drilling's assets are undervalued relative to the potential cash flows they can generate, making it a compelling addition to the portfolio.

Borr Drilling is a Bermudan domiciled owner of 24 modern shallow water jack-up drill rigs. The company has a leveraged capital structure but is expected to pay down debt via strong free cash flow. This positions Borr Drilling favorably in the market, as the demand for drilling services continues to grow, and the company is well-equipped to capitalize on this trend.