Prosafe SE

M&A Activity • Nov 10, 2016

Prosafe SE : Prosafe to further rightsize its fleet - letter of intent to acquire Axis Nova and Axis Vega

Prosafe SE : Prosafe to further rightsize its fleet - letter of intent to acquire Axis Nova and Axis Vega

Prosafe SE ("Prosafe" or the "Company") has entered into a letter of intent

("LOI") with Axis Offshore Pte. Ltd. ("Axis") for the potential acquisition of

all outstanding shares in the two single purpose companies Axis Nova Singapore

Pte. Ltd. ("Axis Nova SPV") and Axis Vega Singapore Pte. Ltd. ("Axis Vega SPV")

(jointly the "New-Build Companies"), and 25% of the shares in Dan Swift

Singapore Pte. Ltd. (the "Dan Swift Shares"). The agreed consideration for the

acquisition will be USD 70 million (NOK 579.2 million) settled by Prosafe in

kind, through the issuance of 585.8 million ordinary shares priced at NOK 0.30

per share, and a subordinated zero coupon convertible bond of NOK 403.4 million,

convertible into 1,344.7 million shares at a conversion price of NOK 0.30 per

share.

Industrial context

The offshore accommodation vessels market is currently in a challenging

situation with significant growth in supply combined with a recession in the oil

and gas industry. Prosafe's strategy is to take a leading role to improve the

situation in the market through cost reductions on all levels, fleet renewal,

scrapping of older units, conversion of vessels to alternative uses and

strategic consolidation.

Having followed the development of the Axis Nova and Axis Vega, which is built

next to Prosafe's own rigs at the same yard, Prosafe believes on first-hand

knowledge that the contemplated transaction offers an attractive opportunity to

acquire the two high specification, harsh environment semi-submersible new-

builds at low risk.  Prosafe considers the contemplated acquisition to be value

enhancing from an industrial and financial point of view, and that it has

limited risk since the transaction is further based on Axis Nova and Axis Vega

coming with cancellation rights and refund bank guarantees of USD 60 million.

The refund guarantee can be claimed in the event that Prosafe chooses to not

take delivery of the new-builds due to weak market conditions, or otherwise.

This will provide additional liquidity to the Company in a downside scenario.

Contemplated transaction

Axis Nova SPV and Axis Vega SPV each control shipbuilding contracts with Cosco

Qidong Shipyard (the "Yard") for the construction and delivery on a fixed price

basis of one advanced and modern semi-submersible accommodation rig to be used

for harsh environments operations (the "Axis Nova" and the "Axis Vega", jointly

the "New-Builds").

As announced by Axis on 29 September 2016 and 31 October 2016 Axis Nova SPV and

Axis Vega SPV have due to delays extending the original delivery schedules at

the Yard entered into addendums to the respective construction contracts which

include lay-up and standstill elements without any cost or payment to the Yard.

As previously announced, Prosafe already has a deferred delivery agreement with

the Yard for the Safe Eurus (to Q4 2019, or such earlier time as required by the

Company).

Prosafe will following the transaction have three accommodation vessels

completed or nearing completion in a preserved, strategic stacking mode with

Cosco Quidong Shipyard in China.  The intention is to start negotiations with

the Yard and other parties to find a solution for the delivery, financing and

operations of the units such that Prosafe can take delivery on attractive terms

upon a market recovery.  Assuming the transaction and this process is completed,

Prosafe envisage scrapping additional accommodation vessels in the period ahead,

in addition to the three units already scrapped in 2016.

The contemplated transaction also includes that Prosafe will enter into a

management contract for Axis' converted monohull Dan Swift (in addition to

receiving the Dan Swift Shares). The Dan Swift vessel will thereafter be

marketed under the Prosafe banner and operated and managed as part of the

Prosafe fleet. Prosafe sees additional upside from the marketing and operation

of the Dan Swift on a standalone basis or as a supplement to the Company's semis

as the case may be, both from management earnings and the minority interest.

The contemplated transaction values Dan Swift at an enterprise value of USD 119

million, and assume that Dan Swift Singapore Pte. Ltd. upon closing will have

balance sheet consisting of total assets of USD 129.0 million, of which USD

10.0 million in cash, a senior bank facility of USD 56.4 million, USD 32.5

million preference share capital with cumulative interest accrual and USD 40.1

million in equity. The senior bank facility is guaranteed by J. Lauritzen A/S,

and will have no recourse to Prosafe. Dan Swift is currently in lay up in

Denmark and based on the current balance sheet the unit will have an estimated

financial runway into Q1 2019.

Axis shareholders include HitecVision Fund VI and LF Investment ApS (a company

owned by Lauritzen Fondet), who respectively own approx. 66% and 34% of the

shares in Axis.

* * * *

"Following the financial restructuring executed this summer, we announced

Prosafe's ambition to adjust the fleet to the market situation and taking the

lead in consolidation. The efforts to complete this transaction represent a

significant step in renewing its fleet and delivering on our strategic

promises. We will continue to work hard to further enhance our fleet, reduce the

operating cost and improve the commercial prospects of Prosafe through the

ongoing reorganization and streamlining of our organization and operating model

as well as engaging actively in initiatives for further growth"

"The addition of the Axis Nova and Axis Vega to our fleet will reinforce our

renewal and high grading program.  We look forward to further enhancing our

relationship with Cosco Qidong and to work with their team to find an optimal

solution for the preservation, marketing and eventual delivery and financing of

the vessels.  Further, a shareholding in and management of the Dan Swift will

add flexibility to our offering and upside potential from the minority interest

while also being in line with our ambitions of reorganizing our operating model

into several strategic segments", says Mr. Stig H. Christiansen, acting CEO for

Prosafe SE.

* * * *

In summary the contemplated transaction will represent strategic and financial

optionality to Prosafe that supports the Company's defined strategy and

ambitions.  A presentation providing further details on the transaction is

enclosed.

As of today there can be no certainty that a definitive agreement will be

reached or that any transaction will ultimately be completed. The transaction,

if agreed, is furthermore expected to be conditional inter alia on consent from

the Company's majority bank lenders, approval and issuance of consideration

shares/bonds by an extraordinary general meeting in Prosafe in compliance with

Cyprus law and regulations, approvals of changes to Dan Swift financing, merger

clearance pursuant to applicable competition regulations (if any), as well as

other customary closing conditions.

Clarksons Platou Securities and Schjødt act as advisors to Prosafe on the

transaction. Danske Bank has delivered a fairness opinion on the terms of the

transaction to the Board of Prosafe.

Stig H. Christiansen, Acting Chief Executive Officer and Robin Laird, Acting

Chief Financial Officer will on 10 November 2016 at 10:00 a.m. CET host a

conference call presenting the contemplated transaction.

Global conference call details:

Norway: +47 800 15 463

United Kingdom: +44 (0)808 238 9578

Audience US Toll Free: +1 (888) 771-4371

Audience US Toll: +1 (847) 585-4405

Confirmation number: 43 78 70 39

Conference call playback available from 10 November 2016 at 13:00 CET:

Playback Number: +1 (888) 843-7419

Passcode: 43 78 70 39#

Attachment: Axis Letter of Intent Presentation

Larnaca, 10 November 2016

Georgina Georgiou, General Manager

Prosafe SE

For further information, please contact:

Glen Ole Rødland, Interim Chairman

Prosafe SE

Phone: +47 907 41 662

Stig Harry Christiansen, Acting CEO

Prosafe Management AS

Phone: +47 51 64 25 17 / +47 478 07 813

Robin Laird, Acting CFO

Prosafe Offshore Services Pte Limited

Phone: +65 81 27 21 01

Cecilie Helland Ouff, Senior Manager Finance and Investor Relations, Prosafe AS

Phone: +47 51 64 25 20 / +47 991 09 467

This information is subject of the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.