Scandinavian Air Ambulance Holding AB (publ) Prospectus regarding admission to trading of SEK 250,000,000 5 year (2013/2018) fixed rate notes

Transcription

1 Scandinavian Air Ambulance Holding AB (publ) Prospectus regarding admission to trading of SEK 250,000,000 5 year (2013/2018) fixed rate notes 9 December 2014

2 IMPORTANT INFORMATION Words and expressions defined in the terms and conditions of the Notes (as defined below) (the "Terms and Conditions") beginning on page 32 of this prospectus have the same meaning when used in this prospectus, unless expressly stated or the context requires otherwise. This prospectus shall be read together with all documents which have been incorporated by reference in the "Legal considerations and supplementary information" section of this prospectus. Unless otherwise explicitly stated, no information contained in this prospectus has been audited or reviewed by auditors. Certain financial and other numerical information set forth in this prospectus has been rounded off and, as a result, the numerical figures shown as totals in this prospectus may vary slightly from the exact arithmetic aggregation of the figures that precede them. In this prospectus, the "Issuer" means Scandinavian Air Ambulance Holding AB (publ) or, depending on the context, the group in which Scandinavian Air Ambulance Holding AB (publ) presently is a parent company. The "Issuer Group" means the Issuer and its subsidiaries from time to time and "Issuer Group Company" means anyone of them. The "CSD" means Euroclear Sweden AB. "SEK" means the lawful currency of Sweden. On 27 June 2013, the Issuer issued a five year fixed rate note loan in the amount of SEK 250,000,000 (the "Notes"). A holder of one or several Notes is referred to as a "Noteholder". The nominal amount of the Notes is SEK 1,000,000 (the "Nominal Amount"). This prospectus has been prepared solely for the admission to trading of the Notes on a regulated market; the Corporate Bond List on NASDAQ Stockholm ("NASDAQ Stockholm"). This prospectus does not contain and does not constitute an offer or solicitation to buy or sell Notes, in any jurisdiction. This prospectus has been approved and registered by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) (the "SFSA") pursuant to the provisions of Chapter 2 Sections 25 and 26 of the Swedish Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument) (the "Trading Act"). Approval and registration by the SFSA does not imply that the SFSA guarantees that the factual information provided in this prospectus is correct and complete. No person has been authorised to provide any information or to make any statements other than those contained in this prospectus. Should such information or statements nevertheless be furnished, it/they must not be relied upon as having been authorised or approved by the Issuer and the Issuer assumes no responsibility for such information or statements. Neither the publication of this prospectus nor the offering, sale or delivery of any Note implies that the information in this prospectus is correct and current as at any date other than the date of this prospectus or that it have not been any changes in the Issuer's or the Issuer Group's business since the date of this prospectus. If the information in this prospectus becomes subject to any material change, such material change will be made public in accordance with the provisions governing the publication of supplements to prospectuses in the Trading Act. This prospectus is governed by Swedish law. The courts of Sweden have exclusive jurisdiction to settle any dispute arising out of or in connection with this prospectus. This prospectus may not be distributed in or into any jurisdiction where such distribution or disposal would require any additional prospectus, registration or additional measures other than those required under Swedish law, or otherwise would conflict with regulations in such jurisdiction. Persons into whose possession this prospectus comes are therefore required to inform themselves about, and to observe, such restrictions. Any failure to comply with such registration may result in a violation of applicable securities regulations. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction outside of Sweden. The Notes may not be offered or sold within the United States (including its territories and possessions, any state of the United States and the District of Columbia) (the "United States") to, or for the account or benefit of, United States persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Each potential Noteholder must in light of its own circumstances determine the suitability of the investment. In particular, each potential Noteholder should: (a) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information which is contained in or incorporated by reference in this prospectus or any applicable supplement; (b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; (c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes or where the currency for principal or interest payments is different from the potential Noteholder's currency; (d) understand thoroughly the terms of the Notes as set forth in the Terms and Conditions and be familiar with the behaviour of any relevant indices and financial markets; and (e) be able to evaluate scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. This prospectus may contain forward-looking statements and assumptions regarding future market conditions, operations and results. Such forward-looking statements and information are based on the beliefs of the Issuer's Executive Management and Board of Directors or are assumptions based on information available to the Issuer and do not constitute any guarantee of future conditions and are subject to risks and factors of uncertainty. Further, actual events and financial outcomes may differ significantly from what is described in such statements as a result of the materialisation of risks and other factors affecting the Issuer Group's operations (for examples of factors of a significant nature, see section "Risk factors" in this prospectus). Finally, all forward-looking statements are solely based on the conditions as per the date of announcement of this prospectus and the Issuer has no obligation (and expressly declines such obligation), to update or change such forward-looking statements, regardless due to any change in information, conditions or anything else, with exceptions for what is required by applicable law and regulations. Any information in this prospectus, and in the documents incorporated by reference, which derive from third parties has, as far as the Issuer is aware and can be judged on the basis of other information made public by that third party, been correctly represented and no information has been omitted which may serve to render the information misleading or incorrect.

3 CONTENTS CLAUSE PAGE 1. RISK FACTORS THE NOTES IN BRIEF DESCRIPTION OF THE ISSUER LEGAL CONSIDERATIONS AND SUPPLEMENTARY INFORMATION ADDRESSES...31 SCHEDULE Terms and Conditions...32

4 1. RISK FACTORS Investments in corporate bonds always entail a certain degree of risk and this is also the case for an investment in the Notes. A number of factors, both within the Issuer's control but also factors not controllable by the Issuer, affect and may come to affect the Issuer's profit, financial position and the Notes. The risk factors applicable, both general risks attributable to the Issuer's operations and risks linked directly to the Notes in their capacity of financial instruments, are described below. The intention is to describe risks that are linked to the Issuer's business and thus also the Issuer's ability to fulfil its obligations in accordance with the Terms and Conditions. The below overview of risk factors are not ranked in order of importance. Before making a decision about acquisition of the Notes, any potential Noteholders should carefully consider the risk factors described below, as well as any other provided information about the Issuer and the Notes. In addition, a Noteholder must, alone or together with its financial and other types of advisers, engage in a general evaluation of external facts, other provided information and general information about the aviation market, the medical care market and more specifically air ambulance companies from its own perspective. A Noteholder should have adequate knowledge to evaluate the risk factors as well as sufficient financial strength to bear these risks. Additional risk factors which the Issuer is not currently aware of or that currently are not considered to be material, may also affect the Issuer's future operations, result and financial position and thus the Issuer's ability to fulfil its obligations in accordance with the Terms and Conditions. All risk factors described below may potentially adversely affect the Issuer's operations, financial position and result, which in turn would affect the Issuer's ability to fulfil its obligations in accordance with the Terms and Conditions. 1.1 Risks relating to the Issuer's business Indebtedness and rental obligations The Issuer Group has a substantial amount of debt and debt service obligations. The total indebtedness of the Issuer as of 30 April 2014 would be approximately SEK 680 million including of the note loan. The Issuer's substantial degree of leverage could have important consequences for a potential Noteholder, including the following: it may limit the ability to obtain additional debt or equity financing for working capital, capital expenditures, product development, debt service requirements, acquisitions or general corporate or other purposes; a substantial portion of cash flows from operations will be dedicated to the payment of principal and interest on the indebtedness and will not be available for other purposes, including operations, capital expenditures and future business opportunities; the debt service requirements of other indebtedness could make it more difficult for the Issuer to satisfy its financial obligations, including those related to the Notes; most of the Issuer's borrowings are at variable rates of interest, exposing the Issuer to the risk of increased interest rates; it may limit the Issuer's ability to adjust to changing market conditions and place the Issuer at a competitive disadvantage compared to competitors that have less debt; and the Issuer may be vulnerable to a downturn in general economic conditions or in the business, or the Issuer may be unable to carry out capital spending that is important to our growth. The Issuer's Group may be able to incur substantial additional indebtedness in the future, subject to the Terms and Conditions. If the Issuer incurs any additional indebtedness, the holders of that debt may be entitled to share rateably with a potential Noterholder in any proceeds distributed in connection with any insolvency, liquidation, reorganization, 4

5 dissolution or other winding up of the Issuer. This may have the effect of reducing the amount of proceeds available to the Issuer and, therefore, paid to a potential Noteholder. If new debt is added to the current debt levels, the related risks that the Issuer now face could intensify. The ability to make payments or to refinance the Issuer's debt obligations depends on the financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond the Issuer's control. The Issuer cannot assure a potential Noteholder that the Issuer will maintain a level of cash flows from operating activities sufficient to permit the Issuer to pay the principal, premium, if any, and interest on our indebtedness. If cash flows and capital resources are insufficient to fund the Issuer's debt service obligations, the Issuer may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance its indebtedness. The Issuer cannot assure a potential Noteholder that the Issuer would be able to take any of these actions, that these actions would be successful and permit the Issuer to meet scheduled debt service obligations or that these actions would be permitted under the terms of existing or future debt agreements. In the absence of such operating results and resources, the Issuer could face substantial liquidity problems and might be required to dispose of material assets or operations to meet debt service and other obligations. If the Issuer fails to meet the payment obligations or otherwise default under the agreements governing indebtedness or rental commitments, the lenders under those agreements may have the right to accelerate the indebtedness and exercise other rights and remedies against the Issuer. These rights and remedies include the rights to repossess and enforce against the assets that serve as collateral, initiate judicial foreclosure against the Issuer, petition a court to appoint a receiver for the Issuer, and initiate involuntary bankruptcy proceedings against the Issuer. If lenders exercise their rights and remedies, the Issuer's assets may not be sufficient to repay outstanding indebtedness and rental commitments, and the Issuer may not have sufficient liquidity after payment of indebtedness and rental obligations to make scheduled payments under the documents governing the indebtedness or to continue the business operations. If the Issuer cannot make scheduled payments on the debt, the Issuer will be in default and, as a result: the debt holders could declare all outstanding principal and interest to be due and payable; the lenders under the finance leases could terminate their commitments to lend money and enforce against the assets securing their borrowings; the lessors under certain helicopter rental arrangements could terminate the helicopter rentals; and the Issuer could be forced into insolvency proceedings, which could result in a potential note holder losing his or her investment in the Notes. Risks related to further indebtedness The Issuer is not permitted to incur additional indebtedness in the future, other than as set out in Condition of the Terms and Conditions, i.e.: under the Notes; under financial leasing; under any hedging arrangement relating to the points above; 5

6 under SEK 42.7 million loan agreements and working capital facility agreements made with Skandinaviska Enskilda Banken AB (publ) or another bank (including refinancing thereof); under a SEK 12 million factoring arrangement made with Skandinaviska Enskilda Banken AB (publ) or another bank (including refinancing thereof); under a SEK 10 million loan agreement made with Norrlandsfonden; under guarantees, indemnities or counter-indemnities provided in the ordinary course of trading activities of any Group Company in connection with the entering into of customer contracts, supply contracts or lease contracts; under SEK 25 million subordinated convertible debt notes issued to Saab AB (publ); made between Group Companies; and aggregate Financial Indebtedness of the Group not falling within subparagraphs above, which in total does not exceed SEK 25,000,000. The financial costs could be higher and/or the refinancing possibilities could be limited or non-existent when the Notes or other debt owed by the Issuer and/or the Issuer Group falls due and require refinancing. This in turn could affect the Issuer's and/or the Issuer Group's liquidity and consequently affect the possibility to repay debt as it falls due and which consequently may have a significantly negative effect on the Issuer's financial position and result. Exchange rate and interest rate risk The Issuer is subject to exchange rate risks in the ordinary course of the business including as a result of the operations. In addition, some of the acquisitions of aircraft and spare parts are denominated in U.S. dollars. The Issuer is therefore exposed to risks associated with the fluctuations of foreign currencies, in particular U.S. dollars and Euro. These currencies have experienced considerable volatility against Swedish Kronor in recent years. To prepare consolidated financial statements, the Issuer translate assets, liabilities, turnover and expenses into Swedish Kronor. Consequently, increases and decreases in the value of Swedish Kronor against these other currencies will affect the amount of these items in the Issuer's consolidated financial statements, even if their value has not changed in their original currency. In addition, to the extent that the Issuer incur expenses that are not denominated in the same currency as related turnover, exchange rate fluctuations could cause expenses to increase as a percentage of turnover, affecting the profitability. The Issuer Group's operations are mainly financed by financial leasing contracts and working capital facilities provided by credit institutions. Interest expenses are therefore one of the main cost items of the Issuer Group. Interest rate risk is defined as the risk that changes in interest rates affect the Issuer's interest expenses. Interest expenses are mainly affected by the extent of interest-bearing debt, the level of current market interest rates, credit institutions' margins and the Issuer's strategy regarding interest rate fixation periods. The Swedish market for interest rates is mainly affected by the expected inflation rate and The Swedish Central Bank's (Sw. Riksbanken) repo rate (Sw. reporäntan). All of the Issuer's credit agreements include floating interest rates and the Issuer does not use interest rate swaps to manage interest rate risk. There is a risk that upward movements in floating interest rates may substantially increase the Issuer's interest rate expenses. Risk of lack of investment capital The Issuer's business requires significant capital expenditure including significant ongoing investment to purchase or lease aircraft and maintain the existing fleet. If capital is not available when required, there is a risk that (i) the Issuer will not be able to meet its contractual undertakings with customers, (ii) the aircrafts may deteriorate due to poor maintenance or not be fit for their purpose which, in each case, may have an adverse effect on the Issuer's financial position and result. 6

7 To the extent that the Issuer do not generate sufficient cash from the operations, the Issuer will need to raise additional funds through public or private debt issuances to execute the growth strategy and make the capital expenditures required to successfully operate the business. General market volatility and adverse economic conditions may increase the cost of raising money in the credit markets substantially as many lenders and institutional investors, concerned about the stability of the financial markets generally and about the solvency of counterparties, may increase interest rates, apply tighter lending standards and reduce and, in some cases, cease to provide funding, to borrowers. Such factors may also adversely impact the Issuer's access to working capital, non recourse factoring and/or other financing alternatives. As a result the Issuer is unable to guarantee that adequate capital sources will be available when needed or will be available on acceptable terms. Insufficient funding may result in the inability to acquire additional aircraft, maintain the existing fleet or take advantage of business opportunities, any of which could harm the Issuer's business. Restrictive covenants may adversely affect the Issuer's operations The Issuer shall comply in all material respects with all laws and regulations it or they may be subject to from time to time. The Issuer shall also ensure that it and all other subsidiaries obtain, maintain, and in all material respects comply with the terms of any authorisation, approval, licence etc. required for the conduct of its business. The Issuer undertakes to ensure that its obligations under these Notes shall at all times rank pari passu and without any preferences among them, and at least pari passu with all other unsubordinated and unsecured obligations of it other than those preferred by law. The terms and conditions governing the Notes contains various covenants that limit the Issuer's ability to, among other things: create or permit to subsist any security or other encumbrance over its assets (including contractual rights) (exceptions applicable); and sell any shares or assets, other than (i) assets sold in the ordinary course of business of the disposing entity, (ii) disposals made within the Group or (iii) disposals of assets made for fair market value provided such disposals do not exceed 5 % of the Group's total assets per calendar year. As a result, the Issuer may be restricted from developing and pursuing its business operations which may have a negative effect on the Issuer's financial position and results. Contracts The Issuer Group has pledged cash and provided other security for the performance of its obligations under certain financing arrangements. In the event that Issuer Group Company does not perform its contractual obligations, a resulting claim for damages may lead to the customer being able to enforce the security provided which may adversely affect the Issuer's liquidity position. There are no limitation of liability provisions in the agreements entered into by Issuer Group Companies with county councils regarding provision of helicopter or airplane ambulance services. There are, however, limitation of liability provisions in the maintenance agreements entered into by Issuer Group Companies with third party contractors concerning the fleet of helicopters and airplanes operated by the Issuer Group. Hence, in the event an Issuer Group Company would be liable to pay damages to a county council regarding helicopter or airplane ambulance services, such Issuer Group Company might not be able to fully recover damages paid to such county council from its third party contractors. There is a risk that this affects the financial position and result of the Issuer. 7

8 Pursuant to certain of the Issuer Group's material maintenance contracts, liability of the maintenance contractor has been limited to the amount which may be recovered from the contractor's insurance company. If no, or a limited amount, is recovered from the maintenance contractor's insurance company and the Issuer Group's own insurance company for faulty or defective maintenance and resulting losses consequently are incurred by the Issuer Group, there is a risk that the deficiency will negatively affect the Issuer's financial position and result. Risks relating to profitability or management of growth The Issuer's profitability is directly related to demand for aircraft services. Because of the significant expenses related to aircraft financing, human resources, insurance and maintenance facilities, a substantial portion of the operating expenses are fixed and must be paid even when certain aircraft are not actively servicing customers and thereby generating income. Although most of the customers of the Issuer pay a fixed service fee that comprises the majority of the total fee, part of the total fee is also based on usage. Any depressed level of helicopter activity could result in a decrease in turnover without any substantial decrease in expenses. A decrease in turnover could therefore result in a disproportionately higher decrease in earnings, as a substantial portion of operating expenses would remain unchanged which could have a material adverse effect on the Issuer's business, financial condition and results of operation. The Issuer's future operating results and continued growth will depend on a number of factors, including the ability to successfully execute the business strategy, the ability to assimilate acquisitions, the ability to identify and successfully complete new acquisition opportunities and the ability to establish new operations. The Issuer may also enter new markets in the future. Furthermore, there can be no assurance that county councils will continue to increase their spending in aircraft infrastructure services or the number of tenders for mission critical helicopter services in line with historical levels. Further, county councils may decide to buy and operate their own helicopters despite the associated start-up costs. Therefore, past levels of growth and profitability may not be replicated. A reduction in spending on helicopter services by county councils could have an effect on the Issuer's business, results of operations and financial condition. The main of the Issuer's turnover in the twelve months ended 30 April 2014 was derived, directly or indirectly, from contracts with county councils. There are inherent risks in contracting with county councils, where continued funding for such contracts is dependent on the ability of such county councils to raise sufficient funds. As a result, a potential Noteholder should not place undue reliance on customer contracts, the terms of those contracts or the size of the contract backlog. Continued economic instability and difficult economic conditions in the Issuer's key markets may lead customers to seek to implement measures aimed at greater cost savings, including efforts to improve cost efficiencies. These and other factors could therefore result in clients reducing their budgets for spending on aircraft services, cancelling contracts and/or delaying payments to the Issuer. As the Issuer generally relies on the turnover generated by a particular contract to finance the investment in aircraft required for such contract, the inability to collect receivables in a timely manner could have a material adverse effect on the Issuer's liquidity and restrict the ability to fund capital expenditures. Further, difficulties may arise because of the Issuer's unfamiliarity with new assets and the business associated with them, as well as the expansion into new geographic areas and exposure to new regulatory systems. 8

9 The past results and growth of the Issuer may not be indicative of the Issuer's prospects and there can be no assurance that the Issuer will sustain or grow profitably in future periods. There can also be no assurance that the Issuer will be able to effectively manage any new acquisition opportunities, new contractual opportunities with customers or any other future growth opportunities, and any failure to do so could have a material adverse effect on the business, financial condition and operating results. Future material acquisitions or entry into material joint ventures or commercial arrangements Assimilating any future material acquisitions into the Issuer's corporate structure or entering into joint ventures or commercial arrangements may strain the Issuer's resources and have an adverse impact on the business. The assimilation of any future material acquisitions that the Issuer may make will require substantial time, effort, attention and dedication of management resources and may distract management from ordinary operations. The transition process could create a number of potential challenges and adverse consequences, including the possible unexpected loss of key employees, customers or suppliers, a possible loss of turnover or an increase in operating or other costs. Inefficiencies and difficulties may arise because of unfamiliarity with new assets and the businesses associated with them, new geographic areas and new regulatory systems. These types of challenges and uncertainties could have a material adverse effect on the business, financial condition and results of operations. The Issuer may not be able to effectively manage the combined operations and assets or realize any of the anticipated benefits of acquiring such acquisitions or any future material acquisitions and the Issuer's profitability may suffer due to acquisition related costs or unanticipated liabilities. Residual value risk The Issuer Group's leasing contracts constitute financial leasing and each relevant Issuer Group Company in its capacity as lessee carries the residual value risk when the respective financial leasing agreements terminate. The Issuer may at such point in time neither have sufficient funds to buy the aircraft, nor to pay the remaining debt relating to the aircraft to the lessor, which may affect the Issuer's financial position. Operating and maintenance costs and technical risks Aircraft business is generally associated with costs for operations and maintenance. Unexpected and extensive maintenance or repair needs in relation to aircrafts which are borne by the Issuer or the Issuer Group, increases in operating costs, the partial or total loss of aircraft capacity could all have a significantly negative effect on the Issuer's earnings, cash flows, financial position, reputation and result. The Issuer Group rely on a few key vendors for the supply and overhaul of components and parts required to maintain its aircraft. Due to high demand, these vendors may experience backlogs in their manufacturing schedules and some parts may be in limited supply from time to time, which could have an adverse impact upon the Issuer Group's ability to maintain and repair its aircraft. The Issuer Group currently obtain a substantial portion of its helicopter spare parts and components from helicopter manufacturers and maintain supply arrangements with other key suppliers. The Issuer Group does not have an alternative source of supply for certain parts and components supplied by the main helicopter manufacturers including Eurocopter, Bell, Bombardier and Beechcraft. Failure or significant delay by these vendors in providing necessary parts could, in the absence of alternative sources of supply, have a material adverse effect on the Issuer Group's business, including the withholding of payments by customers in certain cases. Due to the Issuer Group's dependence on helicopter manufacturers for helicopter parts and components, the Issuer Group may also be subject to adverse impacts from unusually high price increases that are greater than 9

10 overall inflationary trends. Cost increases may not result in an increase in the Issuer Group's contract rates. An unusually high increase in the price of parts or components that cannot be fully passed on to the Issuer Group's customers could have a material adverse effect on its business, results of operations and financial condition. The mission critical aircraft that the Issuer operate are characterized by changing technology, introductions and enhancements of models of aircraft and services and shifting customer demands, including technology preferences. The future growth and financial performance of the Issuer will depend in part upon the ability to develop, market and integrate new services and to accommodate the latest technological advances and customer preferences. If the Issuer is unable to upgrade the operations with the latest technological advances in a timely manner, or at all, the business, financial condition and results of operations could suffer. Any disruption to computer, communication systems or other technical equipment used by the Issuer and the fleet could significantly impair the ability to operate the business efficiently and could have material adverse effect on the Issuer's financial condition and results of operations. The Issuer Group is dependent upon the secondary used aircraft market to dispose of older models of aircraft as part of its on-going fleet modernisation efforts and any spare aircraft capacity associated with the termination or non-renewal of existing contracts. If the Issuer Group is unable to dispose of its older aircraft due to a lack of demand in the secondary market, its aircraft carrying costs may increase above requirements for its current operations, or the Issuer Group may accept lower selling prices, resulting in losses on disposition or reduced gains. The types of aircraft targeted for disposition as part of the Issuer Group's fleet modernisation usually have lower carrying costs than new aircraft. A failure to dispose of aircraft in the secondary market could impair the Issuer Group's ability to operate its fleet efficiently and service existing contracts or win new mandates and could have a material adverse effect on its financial condition and results of operations. The Issuer Group also rely on a limited number of suppliers for the fuel, oils and lubricants required to operate its fleet. The Issuer Group's inability to acquire the required fuel supplies, oils and lubricants could have a material adverse effect on its business, results of operations and financial condition. Aircraft procurement The Issuer Group contract with a small number of manufacturers for most of its aircraft expansion and replacement needs. If any of these manufacturers faced production delays due to, for example, natural disasters, labour strikes, availability of skilled labour, or pending investigations in relation to accidents in which aircrafts manufactured by them have been involved, the Issuer Group may experience a significant delay in the delivery of previously ordered aircraft. There are lead times of approximately months to obtain the primary new light, medium and heavy aircraft types most often required by our customers. Helicopter manufacturers at times have limited availability of aircraft, and the Issuer Group have limited alternative sources of new aircraft. During these periods, the Issuer Group may not be able to obtain orders for additional aircraft with acceptable pricing, delivery dates or other terms. Delivery delays or inability to obtain acceptable aircraft orders would adversely affect the Issuer Group's turnover and profitability and could jeopardize its ability to meet the demands of its customers and execute its growth strategy. Additionally, lack of availability of new aircraft could result in an increase in prices for certain types of used helicopters. A lack of available aircraft or the failure of the Issuer Group's suppliers to deliver the aircraft it has ordered on a timely basis could limit its ability to take advantage of business opportunities which could have a material adverse effect on the Issuer Group's business, financial condition and results of operation. 10

11 Counterparty risk A substantial number of the Issuer's contracts contain minimum service requirements permitting either early termination by the customer or the imposition of financial penalties, or both. A failure to meet minimum service requirements in any number of the customer contracts could have material adverse effects on the business resulting in the loss of key contracts and the payment of significant monetary sums. In addition, upon expiration of their term, these contracts are subject to a tender process that could result in the loss of these contracts to competitors. Unanticipated costs or cost increases could materially affect the profitability of these contracts. Although they represent a minority of the Issuer's contracts, the Issuer rely on a number of short term extendable helicopter service contracts and if some of these are not renewed, the turnover could suffer. The loss of one or more of these contracts could have a material adverse effect on the Issuer's business, financial condition and results of operations. The Issuer give to and receive from the customers indemnities relating to damages caused or sustained by the Issuer in connection with the operations. The customers' changing views on risk allocation may cause the Issuer to accept greater risk to win new business or may result in the Issuer losing business if the Issuer is not prepared to take such risks. The Issuer's current and potential customers may find themselves in a situation due to financial circumstances where they cannot pay the agreed compensation as it falls due or otherwise abstain from fulfilling their obligations. It should be noted that even though the vast majority of customers are county councils, the Issuer is dependent on few large contractual counterparties and therefore the Issuer is exposed to a certain degree of risk. As a consequence, the business of the Issuer could be materially adversely affected and suffer significant setbacks in sales and operating income if the financial condition of one or more of its large customers should change significantly or if one or more of its large customers terminates a contract or renegotiate its terms, which termination or renegotiation may be prompted by various factors, including the conclusions of investigations of accidents in which the Issuer Group's fleet has been involved. In addition, the Issuer may be exposed to the same degree of risk through its financial operations, e.g. from the investment of excess liquidity and upon obtaining long-term and short-term credit agreements. If any such risk materialises it may have a significantly negative affect on the Issuer's financial position and result. Risk of conflict of interest Save as set out below, none of the members of the Board of Directors or Executive Management has a private interest or other duties resulting from their directorship of other companies, enterprises, undertakings or otherwise, that may be in conflict with the interests of the Issuer. However, board member and Chief Executive Officer Henry Hansen owns directly and indirectly in aggregate 15.4 per cent of the shares in the parent company of the Issuer. Board members Andrea Cicero and Luis Iñigo Moreno-Ventas are currently members of the Executive Management of the Avincis Group, which together with Henry Hansen's 15.4 per cent indirect ownership are the sole shareholders of the Issuer. While the Issuer recognises the potential conflicts above, the Issuer does not believe that such appointments constitute an actual conflict of interest between such persons' duties to the Issuer and their duties to the Avincis Group. New or amended legislation 11

12 The helicopter industry is regulated by various laws and regulations in the jurisdictions in which the Issuer operates. The scope of such regulation includes infrastructure and operational issues relating to helicopters, maintenance, spare parts and route flying rights as well as safety and security requirements. The Issuer cannot fully anticipate all changes that might be made to laws and regulations to which the Issuer is subject in the future, nor the possible impact of all such changes. The Issuer's ability to conduct the business is dependent on the ability to maintain authorisations, licenses and certificates. The Issuer is routinely audited to ensure compliance with all flight operation and aircraft maintenance requirements. There can be no assurance that the Issuer will pass all audits in the future. The failure to pass such audits or to be found in breach of regulations applicable to the Issuer could result in fines, adverse publicity or grounding of our aircraft, all of which could have a material adverse effect on the business, results of operations and financial condition, especially if a regulatory breach led to a helicopter crash or accident. In addition, the air medical transportation services and products industry is subject to extensive regulation by governmental agencies which impose significant compliance costs on the Issuer. Changes in laws or regulations could have a material adverse impact on the cost of operations or turnover. Under applicable EU law, an operator must be "effectively controlled" and "majority owned" by nationals of member states of the European Union (or the EEA) to maintain its operating licenses. Other regulations may require the Issuer to obtain a license to operate in a particular country, may favor local companies or require operating permits that can only be obtained by locally registered companies and may impose other nationality requirements. Although the Issuer has operated in most of the countries in which the Issuer operates for a number of years, there is no assurance regarding what national or international regulations may be applicable in the future to the helicopter operations. The revocation of any of the Issuer's licenses could have a material adverse effect on the business, financial condition and results of operations. The Issuer is subject to many different forms of taxation including but not limited to income tax, withholding tax, value added tax, commodity tax and social security and other payroll related taxes. Tax law and administration is complex and often requires the Issuer to make subjective determinations. The tax authorities may not agree with the determinations that are made with respect to the application of tax law. Such disagreements could result in lengthy legal disputes and, ultimately, in the payment of substantial amounts for tax, interest and penalties, which could have a material effect on the Issuer's results of operations. A recent change in Swedish legislation concerning value added tax forced the Issuer to renegotiate fixed term contracts with its customers. Currently there are no pending amendments to legislation governing value added tax. However, there may be future amendments to such legislation which could make it difficult for the Issuer to successfully renegotiate its contracts. New legislation or regulations, decisions by public authorities or changes regarding the application of or interpretation of existing legislation, regulations or decisions by public authorities, which are applicable to the Issuer's medical care, air ambulance, aircraft and other operations or the Notes, may adversely affect the Issuer's business or an investment in the Notes. In particular, regulatory authorities have the ability to suspend flight by certain types of aircraft, or in a particular environment or circumstance for safety reasons, and have done so in the past. These suspensions may be the result of a technical failure or the failure of a particular component used in the Issuer Group's aircraft. Such a suspension may continue pending investigation of the potential safety risk or inspection or modification of aircraft. Any potential suspension the Issuer Group's flights would significantly affect its business operations, as well as its ability to comply with its contractual obligations, as it would be difficult, and substantially costly, to replace a part or all of such aircraft to resume its operations. Any such suspension of a significant part of 12

13 the Issuer Group's fleet would have a material adverse effect on its business, financial condition and results of operations. The operations of the Issuer Group are subject to environmental laws and regulations in the jurisdictions in which it operate that impose limitations on the discharge of noise, pollutants into the environment and establish standards for the treatment, storage, recycling and disposal of toxic and hazardous wastes and may have an adverse impact on its business. The nature of the business of operating and maintaining helicopters requires that the Issuer Group use, store and dispose of materials that are subject to environmental regulation. Environmental laws and regulations change frequently, which may result in unanticipated costs to the Issuer Group's financial position and impact its future operations. Liabilities associated with environmental matters could have a material adverse effect on the Issuer Group's business, reputation, financial condition and results of operations. The Issuer Group could be exposed to strict, joint and several liability for clean-up costs, natural resource damages and other damages as a result of its conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. Additionally, any failure by the Issuer Group to comply with applicable environmental and planning laws and regulations may result in governmental authorities taking action against its business that could adversely impact its operations and financial condition, including: the issuance of administrative, civil and criminal penalties; denial or revocation of permits or other authorisations; imposition of limitations on its operations; and performance of site investigatory, remedial or other corrective actions. The Issuer Group cannot predict the likelihood of change to these laws or in their enforcement or the impact of any such change, or discovery of previously unknown conditions, which may require unanticipated costs on the Issuer Group's financial position. The Issuer is dependent upon publicly procured contracts. Any change to rules and regulations regarding public procurement of such contracts, which entail that the Issuer is not in a position to participate in the public procurement processes, will have a significant adverse effect on the Issuer's business, financial position and result. The Issuer shall comply in all material respects with all laws and regulations that may be subject to the Issuer from time to time. The Issuer shall also ensure that it and all other subsidiaries obtain, maintain, and in all material respects comply with the terms of any authorisation, approval, licence etc. required for the conduct of its business. Disputes and litigation The Issuer is and may become involved in litigation, regulatory and arbitration proceedings from time to time, including with customers, employees, regulatory authorities or other claimants. Such litigation may arise out of aviation related accidents or otherwise. Even if the Issuer was successful in defending such proceedings (including regulatory, civil or criminal proceedings) or resolve any claims to the satisfaction of the parties involved, and whether covered by insurance or otherwise, rather than proceeding to litigation, the Issuer would still suffer from the distraction of management resources to such proceedings, or incur costs and possibly face harm to the reputation from case related publicity. Our involvement in such proceedings or settlements may have a material adverse effect on the business, financial condition and results of operations. The Issuer is a party to certain legal proceedings, which are routine and all of which are incidental to the business. Some matters could involve claims of damages, including claims arising out of certain accidents. The outcome of such litigation may not be 13

14 consistent with estimates and assessments of liabilities. If the Issuer incurs significant costs in excess of amounts anticipated or if such claims fall outside the scope of the insurance policies in place, or if the Issuer is unsuccessful in defending these claims, the business, financial condition and results of operations will be adversely impacted. Increased competition There are few air ambulance medical care contracts available for tender within the rotary wing (helicopter) air ambulance business. Further, the fixed wing (airplane) air ambulance business is essentially a spot market. There is a risk that competition from local and international competitors increases. Increased competition, which leads to the loss of customer contracts, may have a significantly negative effect on the Issuer's business. There can be no assurance that the Issuer will be able to renew contracts with existing customers upon their expiration or that the Issuer will be able to accurately anticipate future operating costs during the bidding process to obtain or renew contracts. Upon expiration of their term, the contracts are subject to a tender process that could result in the loss of these contracts to competitors. The pricing for the bidding process for contracts requires cost estimates. Unanticipated costs or cost increases could materially affect the profitability of these long term contracts. The loss of one or more of these long term contracts or costs or cost increases not anticipated at the time of bidding for a renewal of a contract could each have a material adverse effect on the Issuer's business, financial condition and results of operations. Factors that affect competition in the industry of the Issuer include price, reliability, safety, professional reputation, availability, equipment and quality of service. There can be no assurance that the principal competitors will not be successful in capturing a share of the Issuer's present or potential customer base. In addition, certain helicopter services could be provided by other types of aircraft not currently operated by the Issuer. If any of these occur, the Issuer may lose a significant share of the present or potential customer base. New competitors may emerge in the future and capture a share of the Issuer's present or potential customer base. There can be no assurance that the Issuer will be able to compete successfully against current or future competitors or that such competition will not have a material adverse effect on the Issuer's business, results of operations and financial condition. The Issuer is a holding company The Issuer is a holding company that conducts its operations through subsidiaries and affiliates. The Issuer holds no significant assets or other direct investments in its subsidiaries and is therefore dependent upon receipt of sufficient dividend or interest income from these companies to meet its own obligations. A decrease in dividend or interest income would have an adverse effect on the Issuer's financial condition, results of operation and ability to meet financial obligations. Risks attributable to helicopter operations The operation of helicopters inherently involves a degree of risk. Due to the critical nature of the services the Issuer Group provide this risk is often compounded through low altitude flying in adverse climatic conditions. Mechanical failure or pilot error could cause crashes or collisions and may result in personal injury, loss of life, damage to property and equipment and suspension or reduction of operations. Failure to prevent or respond to a major safety incident could adversely impact the Issuer Group's reputation, operations and financial performance. 14

15 The operations of the Issuer Group carry health and safety risks and the Issuer Group will be exposed to a greater extent to the risk of losses and reputational damage from safety incidents and accidents. The operations can seriously impact the health and safety of employees and the environment. There are particular risks associated with these types of operations. These include accidents, the breakdown or failure of equipment or processes or human performance, including the failure of our safety controls, thereby causing injury or loss of life and extensive property or environmental damage. Any such accidents or breakdowns could adversely impact our reputation, operations and financial performance. In the event that an incident or accident is caused, perceived to be caused, or contributed to, by failings on the part of the Issuer Group or its employees or contractors (for example as a result of negligence, or poor health and safety systems and controls), this could result in adverse publicity, interruption of services to customers, payment of substantial damages not all of which may be insured, fines and the potential loss or suspension of required licences or authorisations and disqualification from future tenders. Moreover, safety-related incidents experienced by other service providers (in particular helicopter operators), who operate in the same or similar markets as the Issuer could impact customer confidence generally and lead to a reduction in customer contracts for the Issuer Group or lead to groundings of a particular type of aircraft by the manufacturer or the regulator that could make it difficult for the Issuer Group to perform the contracts for which those aircraft were required or mean it can only do so at extra cost. Failure to maintain a strong record of safety and reliability that is satisfactory to customers may adversely affect the Issuer Group and the Issuer Group's reputation, relationship with customers and financial conditions or operating and financial results. Furthermore, the operations can be impaired by harsh weather conditions. Poor visibility, high wind, heavy precipitation, sand storms and volcanic ash can affect the operation of helicopters and result in a reduced number of flight hours. A significant portion of the turnover is dependent on actual flight hours and a substantial portion of our direct cost is fixed. Thus, prolonged periods of harsh weather can have a material adverse effect on the business, financial condition and results of operations. In addition, any severe weather patterns, including those resulting from climate change, could affect the operation of helicopters and result in a reduced number of flight hours which may have a material adverse effect on the business, financial condition or results of operations. The potential impact of heightened seasonal demand on labour availability could also have an impact on the ability to provide services. The Issuer Group attempt to protect itself against the above losses and damage by carrying insurance, including hull and liability, general liability, workers' compensation, and property and casualty insurance. The Issuer Group's insurance coverage is subject to deductibles and maximum coverage amounts, and the Issuer Group do not carry insurance against all types of losses, including business interruption. The insurance in place covers all aviation risks related to our operations, including civil liability in respect of accidents, but excluding, among other things, reputational losses and criminal liability. The Issuer Group cannot assure that its existing coverage will be sufficient to protect against all losses, that it will be able to maintain its existing coverage in the future or that the premiums will not increase substantially. In addition, future terrorist activity, risks of war, accidents or other events could increase the Issuer Group's insurance premiums. The loss of its liability insurance coverage, inadequate coverage from its liability insurance or substantial increases in future premiums could have a material adverse effect on the Issuer Group's business, financial condition and results of operations. The aircraft or operations could be suspended for technical or other reasons. 15

16 Regulatory authorities have the ability to suspend flight by certain types of aircraft, or in a particular environment or circumstance for safety reasons, and have done so in the past. These suspensions may be the result of a technical failure or the failure of a particular component used in our aircraft. Such a suspension may continue pending investigation of the potential safety risk or inspection or modification of aircraft. Any such suspension of a significant part of the Issuer Group's fleet would have a material adverse effect on the Issuer Group's business, financial condition and results of operations. The operations are subject to seasonal fluctuations, which could have a material effect on the Issuer Group's business, results of operations and financial condition, including our cash flows and level of indebtedness. The Issuer Group's operations are affected by seasonal fluctuations. Seasonal variations can have a material effect on the Issuer Group's business, results of operations and financial condition, including the Issuer Group's cash flows and level of indebtedness. In addition the potential impact of heightened seasonal demand on labor availability could also have an impact on the Issuer Group's ability to provide the services. Key personnel The Issuer Group's success depends on the continued service and performance of its respective highly qualified and experienced senior management. The continuing success of the Issuer Group relies on its ability to plan for management succession and to attract, train and retain qualified and experienced management. A loss of one or more of the members of the Issuer Group's senior management without adequate replacement could have a material adverse effect on the prospects for or performance of the Issuer Group. Insufficient experienced business development or bidding resources can impair the ability of the Issuer Group to achieve strategic aims and financial targets. The Issuer Group's success also depends on its ability to recruit, train and retain highly skilled and suitably qualified pilots, mechanics, technicians and other highly trained personnel, who represent a substantial amount of its intellectual capital, to serve their customers effectively. Competition for skilled personnel in the industry in which the Issuer Group operates is intense. Employees who are highly trained are likely to remain a limited resource for the foreseeable future. Identifying, recruiting and training personnel requires substantial resources. If the Issuer Group fails to recruit and retain qualified employees, in particular suitably qualified and experienced engineers, technicians, pilots and other specialist skills groups, including by failing to maintain compensation awards at an appropriate level, this could lead to a failure to fulfil contractual obligations, the inability to pursue business in new areas or a loss of reputation, any of which could have a material adverse effect on the business, financial condition or operating or financial results of the Issuer Group. Labor problems could adversely affect the Issuer Group There is no assurance that groups of our employees will not unionize in the future. If the Issuer Group's workers engage in a strike, work stoppage or other slowdown, other employees elect to become unionized, existing labor agreements are renegotiated, or future labor agreements contain terms that are unfavorable to the Issuer's Group, the Issuer's Group could experience a disruption of the Issuer's Group's operations or higher ongoing labor costs, which could adversely affect the Issuer's Group's business, financial condition and results of operations. Babcock International Group The Issuer's Group is part of the Babcock International Group and the interests of the Issuer's Group and those of the Babcock International Group may not always be aligned. 16

17 Further, any event or circumstance that has an adverse impact on the results of operations or the reputation of the Babcock International Group could have an adverse effect on the Issuer's business, financial condition and results of operations. 17

18 1.2 Risk relating to Notes Credit risk Noteholders are exposed to credit risk in relation to the Issuer. A Noteholder's possibility to obtain payment in accordance with the Terms and Conditions is therefore dependent on the Issuer's ability to meet its payment obligations. The Issuer's financial position is affected by a number of factors, some of which have been described herein. An increase in credit risk may also cause the market to price the Notes with a higher risk premium, which could adversely affect the value of the Notes. Change of control Upon a Change of Control Event (as defined in the Terms and Conditions), each Noteholder has the right to request that all or some of its Notes shall be repurchased at a price per Note equal to 101 per cent of the Nominal Amount together with accrued but unpaid Interest. The Issuer's ability to pay cash to the Noteholders following the occurrence of a Change of Control Event may be limited by the Issuer's financial resources at that time. Sufficient funds may not be available when necessary to make any required repurchases. The Issuer expect that it would require third party financing to make an offer to repurchase the Notes upon a Change of Control Event. The Issuer cannot assure the Noteholders that it would be able to obtain such financing. Early redemption by request of the Issuer In certain cases, the Issuer has, pursuant to the Terms and Conditions, the right to redeem the Notes prior to their stated maturity date. Such a right for the Issuer may have an effect on the market value of the Notes. During a period when the Issuer is entitled to voluntarily redeem the Notes, the market value of the Notes will most likely not be significantly higher than the redemption price set out in the Terms and Conditions. Such effects could also arise prior to the actual redemption period. The Issuer could exercise its right to an early redemption of the Notes when the market value of the Notes is higher than the relevant redemption price, which may have an effect on a Noteholder's possibilities to re-invest the repaid amount on the same terms as the terms of the redeemed Notes. Secondary market and liquidity risk Even if the Notes are listed on the Corporate Bond List on NASDAQ Stockholm and available for trading on that market, there may not always be a demand for and/or a trade in the Notes. This can result in Noteholders being unable to sell their Notes at a desired time or to a return which is comparable to similar investments that have an existing and functioning secondary market. A lack of an efficient market place and a liquid secondary market may consequently adversely affect the market value of the Notes. Currency risks The Issuer will pay interest and the nominal amount of the Notes in SEK which may result in currency exchange risks if a Noteholder's operations are mainly conducted in a different currency. A currency exchange risk involves a risk for significant currency exchange rate movements, including devaluation and revaluation, as well as the risk for implementation or amendments to existing currency regulations. A strengthening of a Noteholder's base currency compared to the currency in which the placement is denominated decreases the value of the placement for such Noteholder. Governments and authorities can implement currency controls or currency regulations that will have an impact on the currency exchange rate. The result could be that an investor in the Notes receives a lower rate of return, final payment or nominal amount than expected. 18

19 CSD The Notes are connected to CSD's account-based system, which means that no physical Notes have been or will be issued. Clearing and settlement of the Notes, as well as payment of interest and redemption of the principal amount of the Notes, will be performed within CSD's account-based system. The Noteholders are therefore dependent on the functionality of CSD's account-based system. Meeting of Noteholders The Terms and Conditions include certain conditions regarding meetings of Noteholders. Such meetings may be held in order to resolve matters relating to the Noteholders' interests in the Notes. The Terms and Conditions allow for certain defined majorities to bind all Noteholders, including Noteholders, who have not participated in or voted at the actual meeting in question or who have voted differently than the required majority, to decisions that have been taken at a duly convened and conducted meeting of Noteholders. Consequently, there is a risk that a Noteholder will be bound by resolutions which negatively affect the value of the Notes even if the relevant Noteholder did not vote in favour of such resolutions or did participate in the meeting of Noteholders. No direct actions by Noteholders There are limited possibilities for Noteholders to (i) enforce or recover amounts due or owing to them under the Terms and Conditions or (ii) initiate, support or procure the winding-up, dissolution, liquidation, company reorganisation or bankruptcy of the Issuer in relation to any of the liabilities of the Issuer under the Terms and Conditions. The Noteholders will consequently, to a large extent, be dependent on the actions of other creditors of the Issuer should the Issuer become insolvent. Non-secured obligations, bankruptcy and similar events and risk of priority The obligations of the Issuer under the Notes have not been guaranteed or secured. Moreover, the Issuer has, as part of its financing, incurred debt to credit institutions and all of the shares in the Issuer's subsidiaries, floating charges to certain amounts and mortgages in certain aircraft have in connection therewith been pledged as security. The loans secured by the aforementioned assets of the Issuer Group normally constitute a preferential claim on the Issuer and the Issuer Group. The Issuer intends to continue seeking financing in which case further pledges, as part of such new loans, may be provided. In the event of the Issuer's liquidation, company reorganisation or bankruptcy, the Noteholders normally receive payment after any prioritised creditors (the majority of the Issuer Group's current creditors are prioritised creditors). Every Noteholder should be aware that by investing in the Notes, it risks losing the entire, or parts of, its investment in the event of the Issuer's liquidation, bankruptcy or company reorganisation. Most of the Issuer's customer agreements have been subject to public procurement and may not survive a bankruptcy of the Issuer and may thus be of no value. 19

20 2. THE NOTES IN BRIEF This section contains a general and broad description of the Notes. It does not claim to be comprehensive or cover all details of the Notes. Potential Noteholders should therefore carefully consider this prospectus as a whole, including documents incorporated by reference, before a decision is made to invest in the Notes. The complete Terms and Conditions can be found in the last section of this prospectus. Concepts and terms defined in the section Terms and Conditions are used with the same meaning in this description unless they otherwise are explicitly understood from the context. The Issuer: Issue resolution: The Notes: Scandinavian Air Ambulance Holding AB (publ), registration number , a public limited liability company with registered office in Luleå, Sweden. The issuance of the Notes was authorised by resolutions taken by the Board of Directors of the Issuer on 26 May The Notes are unilateral debt instruments intended for public trading as set out in Chapter 1 Section 3 of the Financial Instruments Accounts Act (Sw. ensidig skuldförbindelse avsedd för allmän omsättning enligt 1 kap. 3 lag (1998:1479) om kontoföring av finansiella instrument). The Notes constitute direct, unconditional, unsecured and unsubordinated obligations of the Issuer and rank pari passu without any preference among them. Issue date: 27 June 2013 ISIN: Nominal Amount and number of Notes: Purpose of issue proceeds: Interest: Final Maturity Date: The right to receive payments under the Notes: Prescription: SE Each Note is denominated in SEK and has a Nominal Amount of SEK 1,000,000. The number of Notes is 250. Initially (i) to make advance payment of reserved new helicopters, (ii) for the repayment of debt and (iii) for general corporate purposes of the Issuer and the Issuer Group. Over time, to make payment of reserved helicopters in part or in full. Eight point five (8.5) per cent per annum, payable on 10 July and 10 January each year. The first Interest Payment Date was 10 January 2014 and the last Interest Payment Date is the Redemption Date. Interest shall be calculated on the basis of a 360-day year comprised of twelve months of 30 days each and, in case of an incomplete month, the actual number of days elapsed (30/360-days basis). 27 June 2018 Any payment or repayment under the Finance Documents, or any amount due in respect of a repurchase of any Notes, shall be made to such person who is registered as a Noteholder on the Record Date or other relevant due date, or to such other person who is registered with the CSD on such date as being entitled to receive the relevant payment, repayment or repurchase amount. The right to receive repayment of the principal of the Notes shall be prescribed and become void ten (10) years from the Redemption 20