Songa fills terms of refinancing, issues $125 million convertible loan

By Susanna Moon

Chicago, April 20 – Songa Offshore SE said it has now met the conditions to refinance its debt and has amended the various financing agreements needed for the refinancing, announced March 15.

As part of this, Songa issued a $125 million subordinated convertible bond loan, by an amendment and increase of the bridge bond loan issued on April 17, according to a company notice.

The company also issued

• 8,466,839,157 new class A shares, of which 7,347,678,915 shares are issued as part of a full conversion of the company's previous 150 million subordinated convertible bond loan; 608,399,269 shares are issued as equity compensation for conversion of accrued interest under the company's senior bond loans; 325,889,248 shares are issued as equity compensation for conversion of accrued interest under the company's senior bond loan; and 184,871,725 shares are issued as equity compensation for conversion of accrued interest under the company's shareholder loan from Perestroika AS.

• 2,141,427,856 transferable warrants to the subscribers of the new convertible bond, with the warrants exercisable from April 20, 2017 up to April 20, 2019 for the right to subscribe in bundles of 10 for 10 new shares in the company at a price per share equal to their nominal value of €0.001.

The new class A shares have equal rights as and rank pari passu with the company's existing ordinary shares, including with respect to voting and dividends.

Afterward, the company's issued share capital consists of 9,340,751,701 shares, of which 873,912,544 are ordinary shares of nominal value €0.11 and 8,466,839,157 are class A shares of nominal value €0.001.

After obtaining approval at a meeting on April 13, the company said it is carrying out a capital reduction, in which the nominal value of the common shares will be reduced to €0.001 and the class A shares converted to and merged with the common shares.

The new class A shares are expected to be converted to common shares and listed on Oslo Bors after release of the company's financial report for the third quarter of 2016.

The company said it also will list the new convertible bond.

As announced April 13, a subsequent equity offering will be launched upon publication of an offering and listing prospectus approval. Shareholders as of close of trading on April 13 will receive non-transferable subscription rights for the subsequent equity offering. The subscription price in the subsequent equity offering will be NOK 0.15, and the maximum number of shares to be issued 1,418,100,000.

ABG Sundal Collier ASA and Swedbank Norge, branch of Swedbank AB (publ.), are the financial advisers in the refinancing and joint lead managers and bookrunners for the new convertible bond.

As previously reported, Songa planned to issue $100 million of 2% subordinated convertible bonds, sell $25 million of equity, convert the 4% convertibles into shares and make amendments to its existing bond issues, the shareholder loan from Perestroika AS and its secured debt facilities.

The new convertibles were to be partly underwritten by way of a $91.5 million 10% bridge bond due 2022 from the company’s largest stakeholders. The bridge bond will be converted into the new convertibles.

The company previously said it expects the refinancing to cure its liquidity shortfall.

New convertibles

The new dollar-denominated subordinated convertibles will have a term of six years, a conversion premium of 15% and a conversion price of $0.0202.

The issue included an upsize option to $125 million.

The convertibles will be callable at par after two years and 20 days if the parity value exceeds $1.75 for at least 20 trading days within a 30-trading-day period. The company will also have a clean-up call option.

Holders will have a change-of-control put option at par.

The company has a share settlement option.

The minimum subscription amount will be $150,000.

For each $100,000 principal of new convertibles, investors will receive warrants for 1,701,720 shares. The warrants will be exercisable for two years beginning one year after issuance.

Proceeds will be used for general corporate purposes.

ABG Sundal Collier ASA and Swedbank Norge are the joint lead managers.

Conversion of old convertibles

Under the refinancing, the 4% convertibles will be converted at par into shares at a price of NOK 0.176 each, which is a conversion of 85% of par at a price of NOK 0.15 per share.

As a result of the conversion, the holders of the 4% convertibles have a post-conversion equity interest in the company of 89.22%, which was expected to fall to 38.8% after the remaining refinancing transactions were completed.

Amendments

As previously announced, bondholders approved its proposed refinancing under three note series at meetings held April 11.

There were enough holders at each meeting to form a quorum.

The company sought approval to amend its NOK 1.4 billion of 8.4% senior bonds due 2018, NOK 750 million of 7½% senior bonds due 2018 and $150 million of 4% subordinated convertible bonds due 2019.

The company obtained votes for 98.58% of the 8.4% notes, 99.73% of the 7½% notes and 100% of the 4% notes, the release noted.

Under the proposed amendments

• The company will repay NOK 466.5 million of the 8.4% bonds on the current maturity date, May 17, 2018, at 103.5% of par and the remaining NOK 933.5 million on Nov. 17, 2020 at 104.25% of par;

• The call price for the 8.4% notes will increase to 104.25% of par from 103.5% of par after May 17, 2018;

• The company will repay NOK 250 million of the 7½% bonds on the current maturity date, Dec. 11, 2018, at par and the remaining NOK 500 million on June 11, 2021 at 100.75% of par;

• Accrued interest on the 8.4% bonds and the 7½% bonds up to the effective date will be paid in shares;

• The interest rate for the 8.4% bonds will be 2.55% from Oct. 1, 2016 to May 17, 2018 and then 6.9%, payable in cash; and

• The interest rate for the 7½% bonds will be 2.45% from Oct. 1, 2016 to Dec. 11, 2018 and then 6%, payable in cash.

In addition, changes will be made to the covenants under the senior bond agreements as follows:

• No dividend will be paid up to Dec. 31, 2018;

• The book equity ratio will be suspended through June 30, 2018. After that, the minimum book equity ratio will be 25%;

• The interest coverage ratio will be suspended through June 30, 2018. After that, the minimum interest coverage ratio will be 2 times;

• The leverage ratio will be suspended through June 30, 2018. After that, the maximum leverage ratio will be 5.25 times;

• A new covenant regarding financial debt with security over Songa Trym, Songa Dee and Songa Delta will be inserted to restrict the group from refinancing the bank facility having security over the legacy fleet other than with banks or credit agencies in an aggregate amount in excess of a certain sum.

The proposal required approval from holders of more than two-thirds of the bonds for each of the bond issues represented at the meeting. To form a quorum, at least half of the bonds for each of the bond issues needed to be represented at the meeting.

The company said the refinancing was supported by the needed majority of the bonds and secured bank facilities.

Songa is an offshore drilling company based in Oslo and Limassol, Cyprus.

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