Havila Shipping ASA: Agreement with lenders about restructuring of the Groups debt

Reference is made to Stock Exchange releases on 01.03.19 and 25.03.19 and later updates in the quarterly reports about the ongoing negotiations with lenders.  The company has now agreed with lenders a restructuring of the debt conditional upon approval from formal bodies.  Necessary bondholder meetings and an Extraordinary General Meeting to decide on the proposal of restructuring of the Group’s debt, and other elements of the restructuring, will be summoned.

Duration

The agreement is for a period of five years, starting 02.01.2020 and ending 31.12.2024.  Each lender can extend the period with one year until 31.12.2025.

Liquidity

The agreements require new liquidity.  In a market where new capital is scarce, the company has agreed with Havila Holding AS payment of a convertible liquidity loan of NOK 100 million. The loan can or shall be converted to shares in order to maintain the relative shareholding in the company.

The restructuring agreements will contribute to maintaining a liquidity position of NOK 175 million throughout the duration of the agreement.

Reduction of interest-bearing debt

At 01.01.2020 outstanding debt was NOK 4,222 million, which  for each vessel will be split into an interest-bearing tranche and a non interest-bearing tranche.  The sizing of the interest-bearing tranche is based on the expected debt service capacity of each vessel during the restructuring period  Debt higher than the expected interest-bearing tranche will be  non interest-bearing.  The total amount of interest-bearing debt will be NOK 3,103 million as of 02.01.2020 and the non interest-bearing tranche will be NOK 1,119 million.

Investments

The company can make necessary vessel investments as part of its ordinary course of business.  The company can also make investments to comply with requirements of applicable law or classification society and in order to comply with requirements of an employment contract.

Debt service

Payment of interest and instalments will, for each vessel, be limited by the respective vessel profit and will be paid quarterly.  If a vessels’ income is insufficient to serve the interest-bearing tranche, the calculated interest and missing instalment will be transferred to the non-interest-bearing tranche.  Vessel profit above accrued interest will serve the interest-bearing tranche according to a predefined payment profile.  Any surplus cash beyond this will be swept by the non interest-bearing tranche for the respective vessel.

There will be quarterly downward adjustment of the interest –bearing tranche according to a twelve year repayment profile (one vessel has a profile of eleven years). For the entire fleet the interest bearing debt will be reduced by approximately NOK 65 million each quarter.  The downward adjustment will be independent of the vessel profit. 

If the profit for each vessel during the period starting eighteen months and ending six months prior to the expiration of the restructuring period is higher than a predefined level, a limited amount will be transferred from non-interest-bearing tranche to interest-bearing tranche.

Outstanding debt at expiration of restructuring period

At the end of the restructuring period all interest-bearing debt will fall due. 

Non-interest-bearing debt will be converted to shares in the company.  Conversion of non-interest-bearing tranche will have the effect that lenders will receive shares maximum representing 47% ownership of the company, but reduced relatively following any upward adjustment as referred to above.

Conversion of liquidity loan

Simultaneously with the lenders conversion of non-performing- tranche, Havila Holding has the right and obligation to convert the liquidity loan in full or in part to shares to maintain its shareholding in the company.

Cash contribution

To safeguard the company’s liquidity position, each vessel’s positive cash flow after payment of interest will support the liquidity with a 10% cash contribution withheld before payment of any quarterly instalment.  Cash contribution will be payable only for periods where the company’s liquidity position is below NOK 175 million.

Covenant

The company shall during the restructuring period, on a consolidated basis, have no less than NOK 50 million in free and available cash.  There are no other financial covenants.

Dilution

Shareholders will be diluted following the lenders right to convert non-interest-bearing debt to 47% of the shares and Havila Holding’s right and obligation to convert the liquidity loan in full or in part to maintain their ownership of 50.96%.  Shareholder dilution will be limited of lenders right to have upward adjustment of interest-bearing tranche transferred from non-interest bearing tranche based on vessel performance. 

Repair issue

The restructuring agreement give the company the opportunity to implement a repair issue after the expiry of the restructuring period.  If one or more lenders use their option to extend the restructuring period with one year, a repair issue will be postponed by one year.  A repair issue will be sized based on the actual dilution that will be the effect of the agreement-

Other restructuring elements

The restructuring agreements contain regulations where the company guarantees operational expenses for each vessel for a period of six months and lay-up costs for a period eighteen months.  For vessels with insufficient income to cover operating expenses and that have no firm contract, the lender can if certain criteria are fulfilled, assume ownership of such vessels at a value of the remaining interest-bearing debt.  One option for the lender is to offer financing of the vessel’s operational and/or lay-up costs for a period.  Such financing, will at the end of the restructuring period, be converted to equity.  Such conversion will not increase the lenders combined ownership after conversion of non-interest-bearing debt to equity.

Accounting effects of the restructuring agreement

According to IFRS the substantially changed terms shall be accounted for as an extinguishment of original financial liability and the recognition of new financial liability. 

The net present value of the calculated cash flow throughout the period of agreement, is calculated separately for each vessels interest bearing tranche and non interest bearing tranche.  It is also made an assessment of the value of the lenders right to convert the remaining amount of the non interest bearing tranche to shares.  Preliminary calculations shows a net positive effect on the P&L account of NOK 986 million that will be booked in second quarter 2020 accounts depending on approval of the agreement in Bondholders Meetings and Extraordinary General Meeting.

Stock Exchange Listing

The company shall remain listed at Oslo Stock Exchange throughout the restructuring period.  This obligation shall extend to the shares as well as to the Bonds.

Support from bondholders

The company has received support to the proposed solution from holders representing more than 2/3 of the outstanding bonds in HAVI 04 (Havila Clipper) and about 45% of the outstanding bonds in HAVI 07 (Havila Subsea).

Contacts:

Adm dir Njål Sævik, +47 909 35 722

Finansdir Arne Johan Dale, +47 909 87 706

Financial advisor:

Arctic Securities

Truls Wiel, +47 484 03 212

Tord Aasen Augestad, +47 484 03 237

This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act