Capital/Financing Update • Jan 5, 2016
Capital/Financing Update
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Denne melding til obligasjonseierne er kun utarbeidet på engelsk. For informasjon vennligst kontakt Nordic Trustee ASA
FRN Havila Shipping ASA Senior Secured Callable Bond ISIN NO 001 059044.1 Issue 2010/2016
Oslo, 5 January 2016
Nordic Trustee ASA (the "Bond Trustee") acts as trustee for the bondholders (the "Bondholders") in the above mentioned bond issues (the "Bonds" or the "Bond Issues") issued by Havila Shipping ASA as issuer (the "Company" or the "Issuer").
Capitalised terms used herein shall have the meaning assigned to them in the bond agreement dated 5 November 2010 (the "Bond Agreement"), unless otherwise stated.
The information in this summons regarding the Issuer, the market conditions and the described transactions is provided by the Issuer, and the Bond Trustee expressly disclaims all liability whatsoever related to such information.
The downturn in the offshore market has, as for other major players in the sector, had a significant impact on the Company. The market for offshore vessels is characterized by supply far exceeding demand. As a consequence of low fleet utilization and rates achieved, many vessels in this segment have generated revenues below operating expenses. Further, vessel valuations are expected in general to extend its decline. The Company has taken measures to adapt to the prevailing market conditions, including as previously reported by lay up of vessels and other cost reducing efforts which will have full effect in the financial statements from Q1 2016 and onwards.
The Company foresees severe financial challenges for the period 2016–2018, and has several debt maturities coming up over the next months, of which it has no readily available means of refinancing. Further, cash flow from operations is not sufficient to serve the current amortisation schedules, and the Company does not expect that the market will improve materially in the short to medium term. On this basis the Company has worked towards a refinancing solution (the "Refinancing") which will allow the Company to maintain a sufficient liquidity buffer to operate through 2018 despite the current downturn.
As announced on 5 January 2016, the Company has over the last months been in discussions with its secured and unsecured bank lenders and has entered into a restructuring agreement (the "Master Agreement") setting out the main terms and conditions of the Refinancing, consisting of the following main elements:
Certain adjustments are made to the general principle for two highly leveraged vessels on long term charters.
(iii) Unsecured debt - interest expenses and payment in kind
The main principle of the Refinancing is for each creditor group to be treated equally and to contribute based on its contractual seniority, regardless of whether such creditor group consists of banks or bondholders. The minimum NOK 200 million equity issue will imply a significant contribution also from shareholders taking into account the current market capitalisation.
The Master Agreement is effective as of 31 December 2015 and subject to the following main conditions to be subsequently satisfied:
If and when implemented, the Refinancing will reduce interest payments and amortisations to a more manageable level considering the prevailing circumstances. The Refinancing is intended to be sufficiently robust to sustain also a low case scenario with a minimal risk to covenants through 2018, and more manageable risk of covenant breach thereafter. Postponement of maturities until 30 June 2020 ensures sufficient time for the Company to refinance in an expected recovering market. While the Company is pleased to have reached agreement with its bank lenders and present an outline for the Refinancing, it is also clear that the conditions set out herein reflect the extremely challenging conditions now facing the Company and all its stakeholders.
Further reference is made to the Issuer's stock exchange announcement of 5 January 2016, and the summons letters dated today for bondholders meetings in the Issuer's two other bond loans, HAVI06/07 and HAVI08. In addition, a presentation providing further details on the Refinancing and other relevant information and updates is attached to this summons as Appendix B.
Based on the above, the Issuer has approached the Bond Trustee in accordance with Clause 16.2.1 of the Bond Agreement and requested that a Bondholders' Meeting be held to consider the amendments.
The Issuer proposes that the Bondholders' Meeting resolve to approve the Refinancing and the following amendments (and any implicit amendments relating thereto) to the Bond Agreement (the "Proposal"):
In Clause 1.1 (Definitions), the definitions of "Bond Reference Rate", "Maturity Date" and "Interest Payment Date" shall be deleted in their entirety and replaced by the following:
"Bond Reference Rate" means 3 months NIBOR.
"Maturity Date" means 30 June 2020 or an earlier maturity date as provided for in this Bond Agreement. Any further adjustment may be made according to the Business Day Convention.
"Interest Payment Date" means 8 February, 8 May, 8 August and 8 November each year and the Maturity Date. Any adjustment will be made according to the Business Day Convention."
In Clause 1.1 (Definitions), the following definitions shall be instated:
""Aggregated Deferred Instalments" means the aggregated cumulative difference, at the end of each quarter, between the original instalment schedule in effect as of [relevant date to be includedl, and the Adiusted Instalments for each Secured Facility (each a "Deferred Instalment")."
"Repair Amount" means the amount of any shortfall resulting from non-compliance with Clause 13.5 (d) (Market Value of Vessel).
"Secured Facilities" means (i) the secured bank facilities as at the date hereof for which any Group Company is a borrower, (ii) the Bond Issue and (iii) the Havila Shipping ASA Senior Secured Callable Bond Issue 2011/2017 (ISINs NO001060502.5 and NO001060503.3), collectively (each a "Secured Facility").""
Clause 10.1 (Maturity) shall be deleted in its entirety and replaced by the following:
"The Bonds shall be repaid as follows:
Partial redemption shall be carried out pro rata between the Bonds (according to the procedures
of the Security Register), and shall be made at par value (100%) plus accrued interest."
In Clause 10.2 (Call Option), Clause 10.2.1 shall be deleted in its entirety and replaced by the following:
"The Issuer may at any time redeem the Bond Issue (in whole and in part) at a price equal to 100% of par value plus accrued interests on the redeemed amount."
In Clause 10.4 (Mandatory Redemption), Clause 10.4.1 shall be deleted in its entirety and replaced by the following:
"Upon a Mandatory Redemption Event occurring the Issuer shall, on or about the day the Issuer is receiving the proceeds following the relevant Mandatory Redemption Event, redeem 100 % of the Outstanding Bonds at a price equal to 100% of par value (plus accrued interest on the redeemed amount), always provided, however, that such redemption amount shall not exceed the net proceeds from Mandatory Redemption Event. Partial redemption shall be carried out pro rata between the Bonds (according to the procedures of the Security Register), and shall be made at par value (100%) plus accrued interest."
Clause 13.4 (d) (Subsidiaries' distributions) shall be deleted in its entirety and replaced by the following:
"The Issuer shall not permit any Subsidiary to create or permit to exist any contractual obligation (or Encumbrance) restricting the right of any Subsidiary to (i) pay any Financial Indebtedness to the Issuer, (ii) make any loans to the Issuer or (iii) transfer any of its assets and properties to the Issuer, except (a) if provided for in this Bond Agreement or (b) subordination of receivables (including intra-group loans) due to the Issuer from another Subsidiary being a borrower under any of the Group's facility agreements in favor of the lenders under such facilities agreements, it being understood that the Issuer may not enforce any such receivables or take any other action against another such Subsidiary in respect to such receivables which would compete with, or be in conflict with, the interest of the lenders under said facilities agreements, whether in bankruptcy or otherwise."
In Clause 13.5 (Preservation of equity, Security Interests and Financial Covenants), Clauses 13.5 (a) (Consolidated Value Adjusted Equity Ratio), 13.5 (c) (Market Value of the Vessel) and 13.5 (d) (Interest Coverage Ratio shall be deleted in their entirety (together with the relevant definitions, update of compliance certificate references etc) and replaced with the following:
Dividends and other distributions $''(a)$
The Issuer shall not declare or make any dividend payment or other distributions, whether in cash or in kind, repurchase of shares or make other similar transactions (including, but not limited to, total return swaps related to shares in the Issuer or service any shareholder loans), or other distributions or transactions implying a transfer of value to its shareholders.
$(c)$ Working capital
The Issuer shall ensure that the Group on a consolidated basis maintains a positive Working Capital. "Working Capital" shall mean on a consolidated basis and at any given time the sum of the Group's current assets less its current liabilities (current liabilities to exclude the current (short term) portion and any balloons of interest bearing debt) in accordance with GAAP.
The Issuer shall ensure that the Market Value of the Vessel from 1 January 2017 is minimum one hundred per cent (100%) of the Outstanding Bonds.
Testing of the Market Value shall be carried out on a quarterly basis, first time as of 31 March 2017. The calculation and supporting documentation shall be disclosed to the Bond Trustee no later than fifteen (15) Business Days after the respective test dates.
If and to the extent the Issuer is in breach of this Clause 13.5 (d), the Issuer shall have a twelve (12) months' remedy period effective from and including the relevant test date. Any such remedy shall be made by means of pre-payment of the Bonds with the Repair Amount, such Repair Amount to be paid with one fourth $(1/4)$ quarterly in the remedy period, provided however, that such repair may only be made if the Vessel has generated positive cash flow after covering full opex and service of the Bond Issue for the last three (3) months immediately prior to the relevant test date, and only by an amount equal to such positive cash flow for that three $(3)$ month period. If and to the extent there is a further decrease in the Market Value of the Vessel during said remedy period, the same procedure shall apply for such further or additional shortfall.
The Bond Trustee shall not (and similar shall apply for all other lenders under the Secured Facilities) be entitled to declare default for breach of this Clause 13.5 (d) where continued failure to comply or repair this market value covenant due to the above restrictions or if such repair would cause a breach of the minimum Liauidity reauirement set out in Clause 13.5 $(b)$ ."
For the avoidance of doubt, the existing Clause 13.5 (b) (Liquidity Reserve) and Clauses 13.5 (e) through (g) shall remain unchanged.
In Clause 14 (Fees and expenses), a new Clause 14.6 shall be added reading as follows:
"The Bondholders shall be entitled to a "back-end fee" to be calculated as one (1) per cent of the Aggregated Deferred Instalments (not including the agreed balloon payments according to the Bond Issue), such calculated "back-end fee" to be paid on 30 June 2020 on the basis of the Aggregated Deferred Instalments accumulated in the period from 1 January 2016 through 31 December 2018."
For the avoidance of doubt, the existing Clause 14.1 through 14.5 shall remain unchanged.
The following covenants shall be added to the Bond Agreement. In the event of conflict or inconsistency between the Bond Agreement and the undertakings set out herein, the strictest shall apply.
The Issuer shall ensure that operation and maintenance of the Vessels shall continue to be done in accordance with the customary and well-reputable routines currently established and in place, and thereby also secure that suppliers and all other creditors rendering service to the Vessels and/or any Group Company being a borrower under any Secured Facility or unsecured financial facility (together the "Obligors" and each an Obligor") or any of them are timely paid or settled at the agreed due dates.
Unless the prior written consent of the Bondholders (and the other lenders under the Secured
Facilities) have been obtained prior thereto, neither the Issuer nor any Obligor shall take up or accept any new loans nor grant or execute any new guarantees, loans or other financial support, save for letters of credit and/or guarantees relating to the ordinary operation of the Vessels.
Neither the Issuer nor the Obligors shall make any investments or acquisitions without the prior written consent of the Bondholders (and the other lenders under the Secured Facilities), save for any capital expenditure or investments related to upgrade (limited to NOK 5,000,000 of aggregate upgrade costs for each Vessel in the period until 31 December 2020) or maintenance work of the Vessels incurred in the ordinary course of business.
No Group Company shall accept or enter into charters into the Group for any new vessel(s), nor extend the term of any current charters into the Group, without the prior written consent of the Bondholders (and the other lenders under the Secured Facilities).
At the end of each quarter from and including Q1 2017 to and including Q4 2018, a cash sweep amount shall be calculated as (i) cash on hand less (ii) any shortfall from compliance with fair market value clauses and less (iii) NOK 400,000,000 (such calculated amount hereinafter referred to as the "Cash Sweep Amount"). Any such Cash Sweep Amount shall be deposited immediately on a pledged and blocked account (the "Cash Sweep Account") with DNB Bank ASA as security for the Secured Facilities on a pro-rata basis according to Aggregated Deferred Instalments.
If and to the extent the Obligors will be in breach with minimum cash covenants by payment of an adjusted instalments, the Obligors shall be entitled to draw from the Cash Sweep Account to pay such instalments. For each Secured Facility, the distribution to the respective lenders of any part of the Cash Sweep Amount shall be considered an upfront payment of the relevant deferred instalments.
Any amount credited to the Cash Sweep Account on 31 December 2018 shall be distributed to the lenders under the Secured Facilities on a pro-rata basis according to Aggregated Deferred Instalments and be applied for payment of deferred instalments and thereafter against the balloon.
The Issuer undertakes to use, and shall ensure that each of the Obligors use, its reasonable endeavors to improve the balance sheet and cost efficiency of the Group. For the avoidance of doubt, it is expressly stated that any failure by the Issuer or any Obligor to improve the balance sheet and the cost efficiency of the Group shall not be considered as an event of default.
The Issuer undertakes not to, and shall ensure that the Obligors does not, execute and/or grant any securities for any unsecured debt, unless that has been approved prior thereto by the Bondholders (and the other lenders under the Secured Facilities), excluding cash deposit required in connection with the ordinary operation of the Vessels.
The Issuer undertakes to inform the Bond Trustee of any default which has occurred under the Master Agreement and/or any of its or the Obligors' other debt or financial swap agreements.
Pursuant to the terms of the Master Agreement, the Issuer may pay cash interest on its unsecured facilities accruing after 31 December 2018 to the extent there is a positive cash flow to service such interest, after servicing interest and instalments in full under the Secured Facilities as confirmed by the lenders under the Secured Facilities latest by 30 November 2018 and 30 November 2019 (as the case may be). To facilitate the evaluation of such consent, the Issuer shall at latest on 30 October 2018 present a cash flow budget for the period from 1 January 2019 until 30 June 2020, and on 30 October 2019 for the period from 1 January 2020 until 30 June 2020, such cash flow budgets to include detailed assumptions and be satisfactory to the lenders under the Secured Facilities in their sole discretion. The Bond Trustee, acting reasonably, shall be authorized to grant such consent on behalf of the Bondholders.
Any receivables (including intra-group loans) due to the Issuer from another Obligor shall be fully subordinated to the rights of the lenders under the Group's secured and unsecured debt facilities, and the Issuer may not enforce any such receivables or take any other action against another Obligor in respect of such receivables, which would compete with, or be in conflict with, the interests of the lenders under such facilities, whether in bankruptcy or otherwise.
Implementation of the Proposal shall be subject to the Conditions in section 3 below. The Bond Trustee shall be authorised to prepare and execute appropriate amendment documents, and may consent and agree to amendments of the terms herein where such amendments (i) are of minor or technical nature, (ii) are otherwise consistent with the principles of the Refinancing and the terms of the Master Agreement and are required in order to implement or give effect to the same and/or the amendments set out above, or (iii) in the opinion of the Bond Trustee do not have a Material Adverse Effect on the rights and interests of the Bondholders.
The completion of the Proposal (and effectiveness of amendment agreements) is conditional upon and subject to (i) approval and implementation of the Refinancing by all the Company's financial creditors, including by the respective bondholders' meetings in all the Company's bonds (as demonstrated to the reasonable satisfaction of the Trustee), (ii) completion of an equity issue with gross proceeds to the Issuer of no less than NOK 200 million, in each case on or before 15 March 2016 or such later date as the Bond Trustee may agree in its sole discretion (the "Long-Stop Date) and (iii) the Master Agreement being effective and not being terminated (collectively, the "Conditions"). Notwithstanding the above, in order to allow for implementation of the Refinancing, including the equity issue and a reduction of the nominal value of the Company's shares required to facilitate this, the amendments (if approved) covered by the Proposal shall take full effect from fulfilment of the condition in item (i) above, with condition in item (ii) remaining as a condition subsequent to be fulfilled within the Long-Stop Date. If such condition is not fulfilled within the Long-Stop Date, then the amendments covered by the Proposal shall be deemed void and the original terms of the Bond Agreement reinstated.
The Proposal is put forward to the Bondholders without further evaluation or recommendations from the Bond Trustee. Nothing herein shall constitute a recommendation to the Bondholders by any of the Bond Trustee or the Issuer or any of their respective advisors. The Bondholders must independently evaluate whether the Proposal is acceptable and vote accordingly.
The Issuer has engaged Swedbank Norway as the Issuer's financial advisor with respect to the Proposal. Accordingly, Bondholders may contact Swedbank Norway at $+4723116288$ for further information.
Swedbank Norway is acting solely for, and relying on information from, the Issuer in connection with the Proposal, and does not assume any liability in connection with the Proposal or the information herein.
For further questions to the Bond Trustee, please contact Lars Erik Lærum at [email protected] or $+4722879400.$
The Bondholders are hereby summoned to a Bondholders' Meeting in the Bond Issue:
Time: 20 January 2016 at 13:00 hours (Oslo time)
Place: The premises of Nordic Trustee ASA. Haakon VIIs gt 1, 0161 Oslo - 6th floor
"The Bondholders' Meeting approves the Refinancing and the Proposal as described in section 2 of the summons for the Bondholders' Meeting, including (i) the amendments to the Bond Agreement as described therein (the "Amendments") and (ii) a temporary waiver of any Events of Default under the Bond Agreement until the earlier of the date of the effective date of the Amendments or the Long-Stop Date, in order to allow for the implementation of the Amendments. The Bond Trustee is authorised to $\overline{a}$ ) prepare, finalise and enter into the necessary amendment agreements and other documentation deemed appropriate in connection with documenting the decisions made by the Bondholders' Meeting according to the summons, including to consent and agree to further amendments of the terms in the Bond Agreement being $(A)$ of minor or technical nature. (B) are otherwise consistent with the principles of the Refinancing and the terms of the Master Agreement, and $(C)$ in the opinion of the Bond Trustee do not have a Material Adverse Effect on the rights and interest of the Bondholders, and (b) for and on behalf of the Bondholders, take such further actions and negotiate, agree, enter into, sign and execute such agreements and documents, and grant any other waivers, that are considered required to complete and give effect to the Proposal. The Bondholders agree that the Bond Trustee may exercise (or refuse to exercise) any discretion, consent or approval required or contemplated in the exercise (or non-exercise) of any such discretion which is connected with the matters referred to in the summons to the Bondholders' Meeting (including without limitation waive any time periods or deadlines, agree to minor amendments to terms set out herein as deemed appropriate or required).
The resolutions shall be subject to and conditional upon the Conditions as described in section 3 of the summons."
* * * * *
To approve the Proposal, Bondholders representing more than 2/3 (two-thirds) of the Voting Bonds represented (in person or by proxy) at the Bondholders' Meeting must vote in favour of the Proposal. In order to have a quorum at least $\frac{1}{2}$ of the Voting Bonds must be represented at the Bondholders' Meeting. Please find attached a Bondholder's Form from the Securities Depository (VPS) as Schedule A hereto, indicating your bondholding at the printing date. The Bondholder's Form will serve as proof of ownership of the Bonds and of the voting rights at the Bondholders' Meeting. (If the bonds are held in custody - i.e. the owner is not registered directly in the VPS - the custodian must confirm; (i) the owner of the bonds, (ii) the aggregate nominal amount of the bonds and (iii) the account number in VPS on which the bonds are registered.)
The individual Bondholder may authorise the Nordic Trustee ASA to vote on its behalf, in which case the Bondholder's Form also serves as a proxy. A duly signed Bondholder's Form, authorising Nordic Trustee ASA to vote, must then be returned to Nordic Trustee in due time before the meeting is scheduled (by scanned e-mail, telefax or post to [email protected], +47 22 87 94 10, or Nordic Trustee ASA, PO Box 1470 Vika, 0116 Oslo, Norway).
In the event that Bonds have been transferred to a new owner after the Bondholder's Form was made, the new Bondholder must bring to the Bondholders' Meeting or enclose with the proxy, as the case may be, evidence which the Bond Trustee accepts as sufficient proof of the ownership of the Bonds.
For practical purposes, we request those who intend to attend the Bondholders' Meeting, either in person or by proxy other than to Nordic Trustee ASA, to notify Nordic Trustee ASA by telephone or by e-mail within 16:00 hours (4 pm) (Oslo time) the Business Day before the meeting takes place.
Yours sincerely Nordic Trustee ASA
Enclosed:
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