Songa Offshore SE announce extensive recapitalization plan

Songa Offshore SE announce extensive recapitalization plan

Songa Offshore SE (“Songa” or the “Company”) proposes a comprehensive refinancing by way of raising up to USD 425 million in new capital by way of a combination of (i) a fully guaranteed equity issue through a private placement with gross proceeds in the amount of approximately USD 250 million (NOK 1,525 million) (the “Private Placement”) and a contemplated subsequent repair offering with expected gross proceeds of approximately USD 25 million (NOK 152.5 million) (the “Subsequent Offering”) (collectively the “Equity Issue”) and (ii) issue of a subordinated convertible bond (the “Convertible Bond”) through a private placement of bonds with gross proceeds in the amount of USD 150 million (the “Convertible Bond Issue”).

The Private Placement and the Convertible Bond Issue are mutually conditional and subject to the approvals by an extraordinary general meeting of the Company which will be proposed in the notice to the extraordinary general meeting which is expected to be held on or about 18 December 2013, and are also contingent upon (a) amendments to the existing CAT-D charter contracts, (b) waivers and amendment agreements with the Company’s bondholders as well as (c) amended agreements with the Company’s syndicated bank facility (such amendments together with the Equity Issue and the Convertible Bond Issue hereinafter referred to as the “Refinancing Proposal”).
If implemented, the Refinancing Proposal will facilitate successful delivery of the Company’s CAT-D rigs as well as creating a solid and sustainable long term financial platform for the Company in the best interest of all stakeholders.
The Company has retained Fearnley Securities AS and Swedbank Norge, part of Swedbank AB (publ) (collectively referred to as the “Joint Bookrunners”) as joint lead managers and joint bookrunners for the Equity Issue and the Convertible Bond Issue. SEB is acting as an independent financial advisor to the Company and its Board of Directors.

For further details and Company updates, see attached the Investor Presentation dated 25 November 2013.

CAT-D contracts – improved terms
As part of the Refinancing Proposal, the Company has proposed certain amendments to the existing charter agreements with Statoil as charterer of the CAT-D rigs. Among other adjustments, the new terms include a 5% average rate increase for the CAT-D units during the fixed contract period in a declining rate profile from 9.0% the first full year to 0.0% in year 8, partly offset by a repayment to Statoil of USD 12,500,000 per rig upon Statoil’s declaration of each of the two initial three-year option periods (i.e. an aggregate repayment of up to USD 50,000,000 in 2023 and up to USD 50,000,000 in 2026). The Company has also proposed certain amendments to ensure increasing bankability of certain variable rate components and to cancel the purchase options at the end of the fixed contract period for CAT-D-1 and CAT-D-2. The above amendments are subject to approval by Statoil and the respective licence partners. As part of the Refinancing Proposal, the loan of USD 222,000,000 from Statoil, which were provided to the Company in order to pre-fund the first installment for CAT-D-3 and CAT-D-4 shall be repaid in the amount of USD 111,000,000 upon settlement of the Equity Issue, and the remaining balance shall be repaid equally upon delivery of CAT-D-1 and CAT-D-2 from the yard.

Waivers and amendment agreements with bondholders
As part of the Refinancing Proposal, the Issuer will request certain waivers and amendments to its outstanding bonds including, but not limited to:
• Extension of the maturity date of the 2016 bond (ISIN NO 001062875.3) to May 2018;
• Extension of the maturity date of the 2015 bond (ISIN NO 001064940.3) to December 2018;
• Amendments of the current floating interest rates of each bond issue to fixed interest rates of 7.5% fixed for the 2015 bond and 8.4% fixed for the 2016 bond (together with, for the 2016 bond, a redemption at maturity of 103.5%);

Amendments to certain covenants (as further described in the attached Company presentation) including waiver of the leverage covenant to and including Q4 2014, waiver for the book equity ratio covenant to and including Q4 2014 and a waiver of the minimum value covenant for the remaining terms of the bonds.
The further details and main terms of the requested waivers and amendments will be included in the summons for the bondholders’ meetings which will be distributed shortly. Bondholders representing more than 67% of each bond have given their pre-commitment to vote in favor of the proposal.

Amendment agreements with lending banks
As part of the Refinancing Proposal, the Company will request certain amendments to its bank debt. The quarterly amortization will be reduced by 50%, the maturity date extended by 1 year until Q4 2016 and the mandatory prepayment on sale of vessels reduced from 120% of the mortgage amount to 50% of the mortgage amount for each of Songa Venus and Songa Mercur, as well as amendments to certain covenants, including without limitation e.g. the equity ratio covenant.

The Equity Issue
The Equity Issue shall be raised by way of a private placement of new shares with gross proceeds in the amount of approximately USD 250 million (NOK 1,525 million). In addition, the Company intends to complete a subsequent offering of shares with gross proceeds up to a NOK amount corresponding to USD 25 million.

The Company’s largest shareholder Perestroika AS, Christen Sveaas, Fondsfinans Spar and certain other of the Company’s shareholders have guaranteed the Private Placement in full. Perestroika AS will subscribe for and be allocated shares in the Private Placement securing Perestroika AS and related parties at least 50.1% ownership post the Private Placement (also taking into account the maximum number of shares which may be subscribed for in the Subsequent Offering).
The Equity Issue is guaranteed in full at a fixed price of NOK 2.50 per share. Perestroika also has the right to subscribe for and be allocated bonds in the Convertible Bond in an amount which will allow Perestroika AS and related parties to maintain an ownership percentage of at least 50.1% also following a full conversion of the Convertible Bond. Out of the shares to be issued to Perestroika AS in the Private Placement, approximately 132 million shares will be issued pursuant to an existing board authorization in advance of the extraordinary general meeting, in fulfillment of a right granted to Perestroika AS by the Company to require the board of directors to use its authorization to issue part of the shares subscribed for by Perestroika AS.
The issue of these shares is subject all other closing conditions than approval by the extraordinary meeting being fulfilled (or that such conditions will clearly be fulfilled). Perestroika AS’ subscription of shares will trigger a mandatory offer for the remaining shares of the Company. Perestroika AS has informed the Company and the Managers that it intends to carve the shares issued to other investors in the Private Placement (the “Offer Shares”) out from the mandatory offer, meaning that the Offer Shares may not be tendered in the mandatory offer to be launched by Perestroika AS.

The Company will give preference to existing shareholders, and may also give preference to other stakeholders over new investors. Other allocation criteria may include size of the order, the investor quality, timeliness of the order and applicable selling restrictions.
The minimum order and allocation has been set to the number of shares that equals an aggregate purchase price of the NOK equivalent of at least EUR 100,000 per investor, in compliance with applicable exemptions from prospectus requirements.
The book-building period commences today, 25 November 2013, at 09:00 CET and is expected to be closed at 20:00 CET on 26 November 2013. The Company may at its own discretion resolve to close or extend the book-building period at any time, however so that the book will not close before 25 November 2013 at 22:00 CET.

Subject to the satisfaction of the conditions for closing of the Equity Issue, the shares issued are expected to be delivered on or about 23 December 2013 by delivery to a separate ISIN pending approval and publication of a listing prospectus. Pending such publication, the Offer Shares will not be tradable on Oslo Børs. Following publication of the Prospectus, the Offer Shares will be transferred to the Company’s ordinary ISIN and thus automatically listed and tradable on Oslo Børs.

Further details of the Equity Issue will be set out in the notice of extraordinary general meeting expected to be dispatched by the Company on or about 26 November 2013 and made available through the Oslo Stock Exchange reporting system. As stated above, the Equity Issue is i.a. subject to approval by the extraordinary general meeting, due approval of the Refinancing Proposal by the relevant bondholders’ meetings, by Statoil and the respective partners, and by the syndicate banks.

The payment date for the Private Placement is expected to be on or about 23 December 2013 with registration and delivery on or about 23 December 2013.

Following completion of the Private Placement, the Company intends to carry out a subsequent repair offering of up to 61 million shares at a subscription price of NOK 2.50, resulting in gross proceeds of up to approximately USD 25 million (NOK 152.5 million), in which the Company expects to grant shareholders holding less than 110,000 shares as of close of trading 22 November 2013 (who are not allocated shares in the Private Placement) non-tradable subscription rights based on their shareholding as of that date (as registered in the VPS on 27 November 2013). Consequently, the shares in the Company will trade exclusive of the right to participate in the Subsequent Offering from and including 25 November 2013. Shareholders allocated shares in the Private Placement will not receive subscription rights, but subscription without subscription rights and oversubscription will be allowed. Shareholders holding shares through a nominee account may risk not receiving subscription rights.

The Convertible Bond Issue
The Convertible Bond will be subordinated unsecured obligations of the Company. The Convertible Bond will be denominated in USD and will have a strike price of 25% above the equity issue price of NOK 2.50 (the strike price will be fixed in USD at the prevailing NOKUSD exchange rate as publicized by Norges Bank on the date of completion of the Convertible Bond issue). The Convertible Bond will have semi-annual coupon payments expected to be in the range of 4.00-6.00% p.a., pricing to be set through an accelerated bookbuilding.
The Company will give preference to current shareholders and investors participating in the Private Placement. Other allocation criteria may include size of the order, the investor quality, timeliness of the order and applicable selling restrictions. Bondholders in the 2011/2016 and 2012/2015 bonds shall have an option to subscribe for and be allocated an aggregate of USD 20,000,000 of the Convertible Bond.

The minimum subscription amount is USD 200,000.
As stated above, the Convertible Bond Issue is i.a. subject to approval by the extraordinary general meeting of the Company, due approval of the Refinancing Proposal by the relevant bondholders’ meetings, by Statoil and the respective partners, and by existing lending banks.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART DIRECTLY OR INDIRECTLY, IN AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES

Source: www.songaoffshore.com

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