LONDON (Bloomberg) — Bermuda-headquartered Seadrill, the Norwegian oil-rig company set up by billionaire John Fredriksen, has raised $1 billion of convertible bonds, the largest ever deal of its kind by a Scandinavian company.

The five-year bonds, issued to expand and fund rigs the company is building, can be converted into Seadrill stock when the shares rise 45 percent from their average price during the sale, the company said in a statement to the Oslo exchange. The bonds will pay interest of 3.625 percent, it said in the statement. Seadrill indicated it was willing to offer a conversion premium of 40 percent to 45 percent and to pay interest of as much as 4.125 percent.

"The oil sector is very hot at the moment," said Heather Beattie, an analyst at Barclays Capital in London. "While it came on the worst terms for investors, the pricing was still attractive at issue." The bonds are now trading at 103.5 percent of face value, a "stretched" valuation, Beattie said.

As crude soars above $93 a barrel for the first time, investors have proved more willing to buy the debt of companies such as Seadrill involved in oil exploration and production. Oil prospectors are working to extract crude in water that's as much as 12,000 feet deep, and in hostile, stormy environments such as the North Sea, using rigs that can cost up to $550 million each.

Companies such as Seadrill build rigs and drill-ships on a speculative basis and then lease them to oil exploration companies at day rates that can be as much as $550,000, according to ODS-Petrodata, an industry research and consulting firm based in Houston.