EOAL holders approve standstill agreement for 15% bonds due 2014

By Toni Weeks

San Diego, April 26 - Bondholders for EOAL Cyprus Holdings Ltd.'s 15% senior secured callable bonds due 2014 approved at a meeting on April 26 a proposal for a standstill agreement, according to a notice by trustee Norsk Tillitsmann ASA.

Sufficient bondholders to form a quorum were present at the meeting, and the resolution obtained 100% of the votes.

As previously reported, the bonds were amended on Jan. 31 following discussions between the company and bondholders that took place in January. The amendments included an additional event of default-failure to raise equity.

The company notified trustee Norsk Tillitsmann ASA during the week of March 23 that it did not think it could raise $2 million of cash equity by March 31. This constitutes an event of default under the terms of the restructured bonds.

As a result, the company and bondholders have agreed to propose and vote on a standstill agreement.

Under the standstill agreement, bondholders would direct the bond trustee not to

• Seek payment of any amounts that are due and payable under the bonds;

• Sue for payment of any amount unpaid under the bonds; or

• Take any enforcement action so long as certain standstill conditions are satisfied.

The standstill agreement can be terminated if bondholders holding 33% of the outstanding principal amount of the bonds give written notice of termination or if approved at another bondholders' meeting.

Previous developments

As previously noted, EOAL intended to make interest payments on the bonds using proceeds from a charter between the company and Technoil-Technologicia e Servicos LDA Angola. However, proceeds from that charter were disrupted; the last payment Technoil made to EOAL was in August 2011. EOAL, in turn, was unable to make the Jan. 15 interest payment to bondholders.

The company issued a suspension notice to and was in the process of taking legal action against Technoil but, in the meantime, was uncertain about when it would be able to recover its funds.

As a result, the company sought approval for a proposed restructuring plan that consisted of the following:

• The release of $6.6 million from a retention account to fund bunker and transit costs to move its vessel ARV1 from Angola to Singapore and to pay urgent accounts payable in relation to ARV1;

• Deferral of the Jan. 15 interest payment to July 15;

• The issuance of additional payment-in-kind bonds in an amount equivalent to 2.5% of the bonds.

The additional bonds will be issued on a pro rata basis. Bondholders will receive an additional PIK coupon of 5% per year, which will accrue from Jan. 15 until the date the deferred interest is paid and the retention account is replenished;

• An additional 5% premium in the event the bonds are declared to be in default;

• A private placement to raise at least $2 million; and

• Sharing of any proceeds from the Technoil recovery between the repayment of the deferred interest payments and EOAL's working capital purposes.

Holders voted in favor of the resolutions at the Jan. 30 meeting.

EOAL Cyprus is a subsidiary of Equinox Offshore Accommodation Ltd. Equinox provides solutions to offshore accommodation and logistics needs and is incorporated in Singapore.

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