Prosafe gets lender backing to refinance debt, sets timeline

By Tali Rackner

Norfolk, Va., Sept. 6 – Prosafe SE said bank lenders representing 100% of its $1.3 billion and $288 million bank facilities confirmed their approval of the company’s proposed refinancing.

The company will now proceed with the relevant amendment agreements and refinancings, according to a company update.

As reported on Aug. 23, the company obtained the needed shareholder approval to restructure NOK 2.4 billion of four series of its floating-rate senior bonds due 2017, 2020, 2018 and 2019. At that time, it had the support of the lenders of 89% of the bank facilities.

As part of the lender talks, Prosafe will restructure its existing interest rate swaps to align the swap portfolio with the amended bank debt amortization profile and agreed to cash sweep mechanics with no impact on or change to liquidity or timing.

The company will also make minor adjustments to the refinancing terms of the bank debt including reinstatement of the original amortization profile on the Safe Eurus tranche of the $288 million facility and a step-up in the market value covenant in March 2021 to 125% for the $288 million facility.

The combined effect of the reduction in bank debt amortization from the first quarter of 2017 until and including the fourth quarter of 2020 and the interest rate swap restructuring is expected to provide a total positive liquidity impact of about $493 million, the company said.

The refinancing will include the issue of 4.38 billion new shares in connection with the private placement that closed July 12, a convertible bond of NOK 82.79 million convertible into 331.16 million new shares and 1.4 billion new shares as payment for the bond conversion.

The subsequent equity offering will be launched upon publication of an offering and listing prospectus. As previously announced, shareholders as of the close of trading on July 12 who did not subscribe to the private placement will receive non-transferable subscription rights for up to 504 million shares, or $15 million. The subscription price in the subsequent equity offering will be NOK 0.25.

The private placement shares will be issued to managers on Sept. 13, and the delivery of shares to subscribers in the private placement will happen on Sept. 14.

The settlement of the remaining forced-cash redemption will occur on Sept. 16, and the conversion of the remaining bonds into new shares will happen on Sept. 20.

Background

As announced July 8, Prosafe sought holder approval to refinance the floaters as part of wide-ranging five-year plan to bolster its finances.

Specifically, Prosafe will redeem the floaters on Sept. 14 in a cash-out tender offer using proceeds from the private placement of stock.

Closing of the refinancing was contingent on approval by banks and shareholders, which has now been attained.

Earlier in August, the company announced the cash-out option and bond conversion amounts for its four series of floating-rate bonds.

Holders exercised the cash-out option for NOK 242 million of the bonds.

As a result of the minimum cash-out amount being exercised, the company will issue 4.38 billion new shares on to investors who participated in the private placement.

Because the cash-out option was exercised for less than the minimum amount of NOK 336 million, the clearing price was set to 35% of current face value of the bonds, and the difference between NOK 84.7 million, or 35% of NOK 242 million, and the minimum cash-out amount of NOK 336 million will be applied for a pro-rata redemption across remaining bonds on Sept. 16, the company said.

Based on received requests from bondholders, the convertible bond will be NOK 82.79 million, and it will be convertible into 331.16 million new shares of Prosafe.

Adjusted for the cash-out amount and the convertible bond, remaining bonds will be converted on Sept. 20 to 1.4 billion new shares of Prosafe through a debt-to-equity conversion.

More details

As previously reported, in the cash-out tender, bondholders were given preference in a new $20 million equity issue if they subscribed for shares before the close of the bookbuilding.

The shares are being issued to the bondholders at NOK 0.25.

The cash-out offer ranged from $40 million to $60 million and was structured as a reverse book-building, with bondholders applying for their preferred cash redemption at 25% to 35% of par.

Bondholders who cannot hold shares due to restrictions in their mandates had an option to choose an alternative to conversion to shares: a 0% five-year subordinated convertible bond settled in shares at maturity at a conversion price of NOK 0.25.

The company said that the refinancing will give it more financial flexibility through the end of 2020 with “a solid liquidity buffer to weather a prolonged market downturn.”

The refinancing will improve the company’s liquidity by about $478 million over a five-year period and slash the net interest bearing debt by about $395 million through 100% conversion of the senior bonds, in addition to the contribution of new equity.

Private placement

In the private placement, the company issued shares at an issue price of NOK 0.25 per share, of which NOK 712 million, or $85 million, was pre-subscribed by Prosafe’s two largest shareholders, North Sea Strategic Investments AS and M&G.

The placement required that the Anchor shareholders’ individual shareholdings after the refinancing not exceed 29.9% of the enlarged share capital of the company post-refinancing.

The company will use a portion of the proceeds to fund the bond buyback.

The private sale was carried out through an accelerated bookbuilding, with a minimum order and allocation level equal to the Norwegian krone equivalent of €100,000. Existing shareholders received preferred allocation for the first $130 million, and existing bondholders received preferred allocation for the remaining $20 million.

Bank loans

In addition to reducing amortization on all bank facilities for four years, the amendments to the facilities will add a cash sweep mechanism, effective from the first quarter of 2018, and interest spreads on the bank facilities will be calculated based on the existing leverage-based margin ratchet with more flexibility to pay part of the rate in kind through the second quarter of 2019.

With the bank loan changes, the company will receive “significant financial covenant relief on all facilities to provide the company with sufficient headroom to operate.”

More background

As part of the refinancing, the company plans to carry out a capital reduction to lower the nominal value of the shares to €0.001 from €0.25. The reduction will be carried out without distribution.

The company also negotiated with Cosco deferred delivery of Safe Eurus until the fourth quarter of 2019 and a limit on any further liability if Prosafe does not take delivery of the vessel, giving the company increased flexibility and reduced financing risk.

In addition, Prosafe and Cosco agreed to defer the repayment of the $29 million seller’s credit to the fourth quarter of 2019.

Bondholders were asked to approve the refinancing and authorize the trustee to take relevant steps to implement the refinancing, including preparing and entering into any necessary amendment agreements, waiving any breaches of clauses in the bond agreements that are reasonably necessary for the refinancing and splitting the bonds, if necessary.

To approve the proposal, bondholders representing more than two-thirds of the voting bonds from each issue represented at the meeting had to vote in its favor. To have a quorum, at least half of the voting bonds for each issue had to be represented at the meeting.

The financial advisers are ABG Sundal Collier ASA (+47 22 01 61 86, +47 412 13 410 or ola.nygard@abgsc.no), DNB Bank ASA (+47 24 16 93 68, +47997026 17, jens.reidar.hveem@nordea.com or pal.vammervold@dnb.no), Nordea Bank Norge ASA (Jens R. Hveem, +47 22 48 79 24 or +4797748842), Pareto Securities AS (Geir Sorflaten +47 977 33 701 or geir.sorflaten@paretosec.com) and Skandinaviska Enskilda Banken AB (publ.), Oslo Branch (+47 22 82 66 96 +47 971 58 933 or einar.wold@seb.no).

Prosafe is a Larnaca, Cyprus-based owner and operator of semi-submersible accommodation/service rigs.

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