SUMMONS TO BONDHOLDERS' MEETING

Transcription

1 Denne melding til obligasjonseierne er kun utarbeidet på engelsk. For informasjon vennligst kontakt Nordic Trustee ASA To the bondholders in: ISIN NO FRN Axis Offshore Pte. Ltd. Senior Secured Callable Bond Issue 2013/2018 Oslo, 15 November 2016 SUMMONS TO BONDHOLDERS' MEETING Nordic Trustee ASA (previously Norsk Tillitsmann ASA) acts as bond trustee for the bond issue FRN Axis Offshore Pte. Ltd. Senior Secured Callable Bond Issue 2013/2018 with ISIN NO (the Bond Issue ) issued by Axis Offshore Pte. Ltd. (the Issuer or the Company ) pursuant to the bond agreement dated 17 December 2013, as from time to time amended (the Bond Agreement ) between the Issuer and the Bond Trustee. All capitalised terms used herein shall have the meaning assigned to them in the Bond Agreement unless otherwise stated. The information in this summons regarding the Issuer, market conditions and the described transactions is provided by the Issuer, and the Bond Trustee expressly disclaims all liability whatsoever related to such information. 1 BACKGROUND AND COMPANY UPDATE 1.1 Current situation of the Issuer The Issuer has been in continuous dialogue with the senior secured lenders since the Bondholders Meeting on 29 July 2016 (the July Bondholders Meeting ) to reach an agreement with terms outlined in the summons dated 15 July The Issuer has also considered various strategic alternatives due to limited development in the negotiations with the senior secured lenders since the July Bondholders Meeting and diverging interests amongst stakeholders. The Company has since the end of the second quarter considered the going concern assessment of the Company. Unless a more longterm solution is implemented before year end, the Company will not be able to meet the going concern test in its accounts, particularly seen in light of a 12 month liquidity forecast which shows that the Company has not sufficient liquidity past May 2017 and that, except of the Proposal set out herein, there are no other viable solutions which will maximise value for all stakeholders. Currently, the Issuer has three subsidiaries: (i) Dan Swift (Singapore) Pte. Ltd., (the Dan Swift Subsidiary ) (ii) Axis Nova Pte. Ltd., (the Axis Nova Subsidiary ) and (iii) Axis Vega Pte. Ltd.

2 (the Axis Vega Subsidiary, together with the Axis Nova Subsidiary, the Newbuilding Subsidiaries ). The Dan Swift Subsidiary is the owner of the mono-hull flotel named Dan Swift currently laid up, and is the obligor under the senior secured debt facility under which USD 74.4 million is currently outstanding (the Senior Secured Debt ). The Senior Secured Debt is facing amortisations which the Issuer is unable to meet in a 12 month forward looking perspective with the consequence that the Issuer will face a possible event of default under the Senior Secured Debt. A default will lead to an immediate maturity of the claim of USD 38 million the Dan Swift Subsidiary has against its parent (the Dan Swift Claim ) and a cross default under the Bond Agreement. The parent has not sufficient funds to mitigate such scenario unless it is recapitalised. Any failure to recapitalise will lead to an obligation of the Issuer to file for insolvency proceedings. Each of the Newbuilding Subsidiaries holds a newbuilding contract over the vessels to be named Axis Nova and Axis Vega respectively. The Issuer is of the opinion that the Newbuilding Subsidiaries are in a position to be able to cancel the newbuilding contracts and thereby entitled to reclaim the advance payments which are backed through refund guarantees totalling about USD 60 million issued from the Bank of China (the Refund Claims ) 1. Such cancellations always hold an amount of uncertainty. Consquently the Issuer has entered into certain standstill arrangements with the yard. For Axis Vega, reference is made to the Issuer s announcement of 31 October 2016 under which it stated that the Issuer has agreed an amendment to the shipbuilding contract with COSCO (Qidong) Offshore Co. Ltd. The standstill arrangement postpones the delivery until 20 August 2017 or earlier at the Company s request. As a consideration for the amendment, the Issuer waived all liquidated damages having accrued due to the delay. The amendment also provides that any cancellation rights due to delay, shall not be exercised prior to 4 August The agreement safeguards and strengthens the Issuer's legal position in respect of the delay having occurred in construction of the Axis Vega, while maintaining commercial optionality through exclusive marketing rights for the vessel. The arrangement for Axis Nova is similar to the arrangement for Axis Vega outlined above. The delivery of Axis Nova is postponed until 20 August 2017 or earlier on the Company s request. Reference is made to the Issuer s announcement of 2 July 2015 for additional information. 1.2 Recapitalisation and sale of shares to Prosafe In light of the above situation, the lenders under the Senior Secured Debt have agreed in principle to a USD 45 million amortization relief over a 3 year period (excluding an early repayment of Senior Secured Debt of USD 18 million) and removing a possible cross-default against its guarantors. The lenders have inter alia required that the Issuer with support of its Shareholders undertakes to inject into the Dan Swift Subsidiary an amount of USD 22 million against a full cancellation of the the Dan Swift Claim. The funds will be applied by the Dan Swift Subsidiary to repay the Senior Secured Debt with USD 18 million reducing such debt to USD 56 million and leaving a USD 10 million liquidity buffer, sufficient for a 3 year runway. 1 Bank of China holds a stand alone credit rating of bbb (Standard & Poor) and baa2 (Moody s) with a stable (Standard & Poor) to negative (Moody s) outlook as of May 2016 (source: 2

3 The recapitalisation of the Dan Swift Subsidiary will also require the recapitalisation of the Issuer in a manner that ascertains a full discharge of the Bond Issue. The shareholders of the Issuer (the Shareholders ) are willing to inject up to USD 30 million of equity to resolve both the equity and liquidity requirements of the Dan Swift Subsidiary, and the debt situation of the Issuer on the following conditions: (i) the liquidity injection will be based on a fair value assessment from a third party appraiser, (ii) the reduction of the unsecured debt to an amount that represent an acceptable fair value for the Issuer, including eliminating all intercompany debt between the Issuer and the Dan Swift Subsidiary, and a discharge of the Bond, (iii) satisfactory refinancing of the Senior Secured Debt enabling a minimum 3 year runway, and (iv) the sale of 25% of the shares of the Dan Swift Subsidiary (free of any liens / charges) as well as 100% of the shares of the Newbuilding Subsidiaries to Prosafe SE ( Prosafe ) for a consideration of USD 70 million in shares and subordinated zero coupon convertible bonds issued by Prosafe at a issue price / conversion price of NOK 0.30 per share) (the Prosafe Transaction ). As the Shareholders (directly or indirectly) control 2/3 of the Bond, it is important for the Issuer to ensure that a proposal to reduce the unsecured debt to an amount acceptable to the equity does not confer an unreasonable advantage to the Shareholders at the expense of the Bondholders. On this basis, the Issuer has retained a third party appraiser to provide an opinion relating to a fair transaction (the Third Party Fairness Opinion ). The Third Party Fairness Opinion 2 considers the potential recovery for the Bondholders in the event the Prosafe Transaction, which secures a going concern, is not commensurated. The opinion sets out several assumptions: Given the specialized nature of the Dan Swift and the lack of comparable vessel transactions, the third party appraiser assumed a forced sale value range of USD million. The key assumption relating to the Nova SPV and Vega SPV assuming inability of the Issuer to support the two subsidiaries in a default situation may be USD 48 million, based on risk weighted scenarios for the Refund Claims. The assumption takes into account that insolvency may attract a higher degree of disputes than a solvent reorganisation. In the Issuer s opinion and after a carefull analysis and protracted negotiations, there are at this stage only two possible solutions, (a) a full break-up of the company by way of a liquidation or (b) a recapitalisation based on the situation described above. Taking into account the various interests of the stakeholders, being the lenders under the Senior Secured Debt, the guarantor of the Senior Secured Debt, the Bondholders and the Shareholders, the Issuer has decided to aim for a full recapitalisation with the contribution from all stakeholders in order to avoid involvency proceedings, but implement a solvent reorganisation. On the basis of the assessment outlined above and the estimated recovery rate described in the Third Party Fairness Opinion, the Issuer proposes to the Bondholders that the Issuer is enabled to call the Bond at 90% of par value (including accrued interest (cash or PIK)) of the Bond Issue in order to 2 Any Bondholder wishing to optain the Third Party Fairness Opinion can obtain this by contacting the Issuer against a non-disclosure and non-reliance statement towards the party providing the opinion. 3

4 ascertain the equity increase of the Issuer with USD 30 million. Similarly, the Bondholders will be provided with a put option upon the occurrence of the Prosafe Transaction. 2 THE PROPOSAL With reference to section 1 above, the Issuer has requested the Bond Trustee to summon a Bondholders' Meeting to consider the approval of the following approvals and substantive amendments to the Bond Agreement (the "Proposal"): (i) (ii) (iii) The Prosafe Transaction. The Change of Control Event to exclude the Prosafe Transaction. An additional Clause to read as as follows: Upon the Prosafe Transaction being commensurated (the Put Event ), each Bondholder shall have the right to require that the Issuer redeems its Bonds (a Put Option ) at a price of at 90% of par value (including accrued and unpaid interst / PIK interest). The Put Option must be excercised within 7 calendar days after the Issuer has given notification of the Put Event. The Put Option may be excercised by each Bondholder by giving written notice of the request to its Account Manager. The Account Manager shall notify the Paying Agent of the redemption request. The settlement date of the Put Option shall be the third Business Day after the end of the 7 calendar days exercise period of the Put Option. (iv) The temporary amendment of Clause 10.2 (Call Option) of the Bond Agreement to the effect that the Issuer may call the Bonds at 90% of par value (including accrued and unpaid interst / PIK interest), callable with a 5 Business Days prior written notice at any time from the date of the approval of the Proposal until the earlier of the 7 calendar days after the commensuration of the Prosafe Transaction or 31 January (v) The approval that any interest (including any default interest) payable until 31 January 2017 shall be postponed until 14 February (vi) The waiver of any breaches of clauses in the Bond Agreement that are reasonably necessary in order to implement and complete the Recapitalisation, including the Prosafe Transaction, set out in section 1.2, where such amendments are of minor or technical nature or are otherwise consistent with the principles of the recapitalisation and in the opinion of the Bond Trustee are not materially adverse to the rights and interests of the Bondholders. The Trustee shall release any security required to implement the Prosafe Transaction subject to a pre-agreed closing procedure permitting the release of security prior to an exercice of the Call Option. 3 FURTHER INFORMATION For further questions to the Issuer, please contact CEO Jesper Kragh Andresen at jkr@axisoff.com or

5 For further questions to the Bond Trustee, please contact Lars Erik Lærum at or EVALUATION OF THE PROPOSAL 4.1 The Issuer's evaluation In the Issuer's opinion, the Proposal represents a fair solution for the Bondholders. Implementation of the Proposal will significantly improve its financial condition and help the Issuer through the continued downturn in the market. 4.2 Non-reliance 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 the Bond Trustee. The Bondholders must independently evaluate whether the Proposal is acceptable and vote accordingly. 4.3 Pre-acceptances The Issuer has informed the Bond Trustee that Bondholders holding in excess of 95% of the Outstanding Bonds have provided irrevocable undertakings to vote in favour of the Proposal at the Bondholders' Meeting. 4.4 Summons for Bondholder s Meeting Bondholders are hereby summoned to a Bondholders' Meeting: Time: Place: 30 November 2016 at 09:00 hours (Oslo time) The premises of Nordic Trustee ASA, Haakon VIIs gate 1, 0161 Oslo - 6th floor Agenda: 1. Approval of the summons. 2. Approval of the agenda. 3. Election of two persons to co-sign the minutes together with the chairman. 4. Request for adoption of the Proposal. It is proposed that the Bondholders' Meeting resolves the following: Agenda item 4: "The Bondholder's Meeting approves the Proposal as described in section 2 of the summons for the Bondholders' Meeting. 5

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