Cecon seeks holder approval to amend bond terms for new York financing

By Susanna Moon

Chicago, Feb. 19 - Cecon ASA said it is asking holders to approve amending some bonds related to new financing from York Capital for completion of the three vessels under construction at Chantier Davie Canada Inc.

The holders will vote at a meeting to be held in Oslo on March 5.

The company is seeking changes under its 5% tranche A senior secured bonds due 2013 with warrants and the 8% senior secured bonds due 2016 issued by Cecon Shipping 1 AS and Cecon Shipping 2 AS in three tranches, according to a notice by trustee Norsk Tillitsmann ASA.

As an inducement, holders will receive an offer to subscribe for Cecon shares if the amendment passes.

The company has been in talks with holders of more than 66 2/3% of each series of bonds, who have agreed to vote in favor of the proposal, the notice said.

In order for the measure to pass, at least two-thirds of those represented for each bond tranche must vote in favor it. In order to form quorum, at least half of each bond tranche must be represented at the meeting.

Skipping interest

The company said on Dec. 18 that it sought approval from holders to pay interest in kind on the bond tranches. The meeting was held on Jan. 8 in Oslo to ask bondholders for approval to skip the cash interest payment due on Dec. 18.

The company was working to resolve "the situation at Davie Yard with the aim of completing the construction of the vessels and to repay/refinance the loans granted by Export Development Canada," according to a previous notice from Norsk Tillitsmann.

Cecon was working with the new owner of Davie Yard on this, which was causing delays, the notice said, and making it not "prudent" to pay cash interest due that month.

That was not the first time the company has sought to pay in-kind interest on the bonds.

On Sept. 19, Cecon received a waiver from the holders to pay in kind interest on the 8% bonds issued in three tranches.

The interest on the 5% bonds was paid in cash due to the priority and waterfall provisions of the loan agreement governing the bonds.

In 2010, Cecon was having three vessels constructed by Davie Yards Inc. The latter then filed for creditor protection under the Canadian Companies' Creditors Arrangement Act and suspended production activities on the first vessel to be delivered.

Cecon said it had been working toward completing the construction of the vessels. One of its partners in this effort decided to withdraw from the project. As a result, new financing and refinancing arrangements that were to be put in place together with the new construction contracts were delayed.

Cecon is a subsea installation contractor located in Arendal, Norway.

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