Summons to Bondholders Meeting - Amendment of Loan Agreement

Transcription

1 Denne melding til obligasjonseierne er kun utarbeidet på engelsk. For informasjon vennligst kontakt Norsk Tillitsmann ASA To the bondholders in: ISIN: NO per cent Troms Fylkes Dampskibsselskap ASA Senior Unsecured Convertible Bond Issue 2004/2009 Oslo, 5 January 2009 Summons to Bondholders Meeting - Amendment of Loan Agreement 1. Background Norsk Tillitsmann ASA ( Norsk Tillitsmann or NTM ) is appointed as loan trustee (the Loan Trustee ) for the above mentioned bond issue (the Convertible Loan or the Loan ) under which Hurtigruten ASA ( HRG or the Company ) is the borrower. All capitalised terms used herein shall have the meaning assigned to them in the agreement of the Loan (the Loan Agreement ) or this summons to the Bondholders meeting unless otherwise stated. 1.1 Overview Hurtigruten ASA is facing a critical liquidity situation. Liquidity forecasts developed by the Company during the Fall 2008 conclude that the Company is dependent on completing a total financial restructuring solution. Towards this end, the Board and Management of the Company has throughout the Fall of 2008 developed a comprehensive action plan and financial restructuring package which is currently being implemented. The comprehensive action plan and financial restructuring package consists of the following elements: 1. Increase income by continuing the black belt improvement program 2. Reduce debt by divesting non-core business with a total book value of NOK 1.1 billion 3. Implement a cost reduction program with an identified cost saving target of NOK 150 million within SG&A 4. Renegotiated new commercial terms in the existing agreement between Hurtigruten and the Norwegian government, and initiation of a bidding process for a new commercial contract 5. A comprehensive financial restructuring package consisting of: o o A NOK 300 million revolving credit facility from DnBNOR and Nordea, A 36 month deferral of instalments on the original NOK 3.3 billion secured debt to the bank syndicate (with a cash sweep as further described under section 2 (ii) below), M AILING ADDRESS P.O.B O X VIKA, N -O I16 OSLO LO CATION HAAKON VII GATE I, OSLO, NORWAY phone fax org.nr no MVA mail@trustee.no

2 o o o NORSK TILLITSMANN ASA A 36 month deferral of the instalments payable by the limited partnerships (in Norwegian kommandittselskaper ) named Kystruten KS and KirBerg Shipping KS under their bareboat charter hires in respect of MS Richard With and MS Nordlys, A 36 month payment extension of maturity of the NOK 150 million outstanding convertible loan, A new equity issue through a private placement raising total gross proceeds in the amount of NOK million (the Private Placement ) and (i) a subsequent share issue ( repair issue ) directed towards shareholders not being invited to Participate in the Private Placement and (ii) a directed share issue towards bondholders not being invited to participate in the Private Placement on the terms offered to the bondholders as further described in section 3 A below. The bank syndicate has demanded that gross proceeds in the amount of NOK 300 million as a minimum are secured by the Company. 1.2 Below is a short brief on the status of this action plan and financial restructuring package Increase income by continuing the Black Belt improvement program. In the Fall of 2007 the Company started an extensive improvement program to increase bookings, yield rate and on board sales.furthermore, the program has led to streamlining of all key work processes in the Company, including both Norwegian and foreign marketing and sales operations. So far the program has produced an improvement in the yield rate during the winter and shoulder season (Spring and Fall). Furthermore, the program has prepared the organization for restructuring to further reduce SG&A costs through structural measures. The program will be continued to keep up the work to increase income and improve the operation Reduce debt by divesting non-core business with a total book value o f NOK 1.1 billion. During the Fall of 2008 final agreements have been signed for the sale of Hurtigruten Hotels AS for NOK 19.6 million (equity value), Bergenske Reisebyrå AS (Bergenske Travel Agency) for NOK 52 million (equity value), and the Coastal Ferry Business for NOK 488 million (enterprise value). The sale of Hurtigruten Hotels AS has been closed yielding a NOK 16 million accounting gain in the 2nd quarter The sale of Bergenske Reisebyrå AS will yield an accounting gain of NOK 26 million which will be recognized at the closing of the transaction. Closing is expected end of February pending a review by the competition authorities. The sale of the Coastal Ferry Business will yield an accounting loss of NOK 103 million in the 4th quarter 2008, and closing of said transaction took place on 5 January Divestment processes are ongoing for Hurtigruten s 73.1 percent ownership of TIRB AS and 50 percent ownership of Nor-Tines AS. The vessel MS Nordnorge is also placed on the list of assets to be divested, but the ship has thereafter been contracted by Aker Solutions as an accommodation vessel until 5 April 2009 with subsequent options of prolongation. The contract value is NOK 80 million and the hire period commenced on 20 December Cost reduction program with an identified cost saving target of NOK 150 million within SG&A. Hurtigruten has developed a program to reorganize and rationalize the Company s SG&A functions. This program will reduce existing staff levels by 210 full time employees. Due to -2-

3 costs and expenses associated with the implementation, net positive financial effects are not expected during 2009, but the program is expected to yield full financial effect from New commercial terms for the existing agreement between Hurtigruten and the Norwegian government, and initiation of a bidding process for a new commercial contract. Following negotiations during the Fall 2008, the Company received NOK 125 million as a one time compensation for NOx-costs for 2007 and HI 2008, as well as a NOK 66 million increase in the general compensation under the current transportation agreement. These payments were received in December In addition, the Norwegian government has agreed to increase the general payment to Hurtigruten with NOK 88 million for 2009 and NOK 81 million annually from The government will also allow Hurtigruten to reduce the total fleet by one vessel during the winter season without reduction in the agreed compensation under the current commercial transportation agreement, which expires in Flowever, the government has communicated that it expects that the new commercial transportation agreement will be put up for tender during HI 2009, with a new commercial agreement taking effect from Financial restructuring plan On Monday 22 December 2008, Hurtigruten completed the Private Placement raising gross proceeds of NOK 313,850,000 at NOK 1 per share, subject to approval at an EGM scheduled for the end of January Existing shareholders agreed to subscribe for NOK 287 million and owners of the Convertible Loan for NOK 27 million. Completion of the Private Placement is further conditional upon agreements securing the comprehensive financial restructuring package described in the stock exchange notification on 22 December The conditions for completion of the Private Placement are further described in section 2 below. The Board of Directors of Hurtigruten ASA will also propose a repair issue directed towards shareholders not being invited to participate in the Private Placement of NOK 125 million at NOK 1 per share at the EGM. In connection with the Private Placement, the largest bondholders in the Convertible Loan was given an alternative offer, whereby they were given the opportunity to choose between the proposed 36 month extension of the repayment date for the Convertible Loan (with due date in June 2012) and to subscribe for an amount up to the amount held in the Convertible Loan, of which 50% in shares in the Private Placement and 50% in a new unsecured bond loan with interest rate of 10% per annum and a term of 36 months. Bondholders who chose the latter alternative will be given a right to demand redemption or repurchase of their bonds in the Convertible Loan for a nominal amount equal to the subscribed amount 30 days after the new shares and the new bonds have been issued. As part of the financial restructuring package, Hurtigruten will provide the same alternative offer to the remaining bondholders in the Convertible Loan. Subject to satisfaction of the conditions for completion of the Private Placement, such offer will be made after the EGM of the Company to be held in the end of January The Company emphasizes that the proposed financial restructuring package is a result of a long and demanding process and that the implementation of the package is vital for the continued operations of the Company. -3 -

4 2. Conditions of Completion of the Private Placement and Restructuing of HRG s interest bearing debt The completion of the Private Placement is subject to certain conditions, including a restructuring of HRG s interest bearing debt. The conditions are as follows: (i) that a short term credit facility of NOK 300 million is provided to the Company by DnB NOR Bank ASA and Nordea Bank Norge ASA on the terms and conditions to be agreed between DnB NOR Bank ASA, Nordea Bank Norge ASA and the Company (the Bridge Loan ) and that the due date for repayment of any amount drawn under the Bridge Loan at the earliest is set to 31 December 2009, (ii) that an agreement is entered into between the Company and the Company s financing banks, represented by Nordea Bank Norge ASA as Agent (the Banks ), whereby payment of the instalments payable in the period from March 2009 until December 2011 under the loan agreement dated 22 September 2006 in the original amount of NOK 3.3 billion are deferred and made payable on a pro rata basis together with the then remaining instalments from and including the instalment due in March 2012 on the terms and conditions to be agreed between the Banks and the Company, provided however, that the amended loan agreement also will contain a cash sweep-provision whereby the Company on an annual basis from the expiry of the first quarter 2010 shall undertake to use any cash in excess of NOK 500 million at the expiry of the first quarter each year to make extraordinary prepayments of the loan. Any payments made under the cash sweep arrangement shall not reduce the loan facility amount that can be drawn under the loan agreement and shall further reduce the instalments payable from March 2012 onwards to the extent that the Company has not re-borrowed any funds prepaid under the cash sweep. (iii) that the repayment date for the Convertible Loan is extended with at least 36 months and the conversion price re-set according to the applicable provisions of the loan agreement and further amended so that no instalments are payable during the term of the Convertible Loan and that the Convertible Loan is interest free from and including 1 January 2009 until 31 December 2009 after which it shall carry interest at the rate of 7% per annum, such interest to be payable at the repayment date of the Convertible Loan, (iv) that the instalments payable by the limited partnerships (in Norwegian: kommandittselskaper) named Kystruten KS and KirBerg Shipping KS under their bareboat charter hires in respect of M/S Richard With and MS Nordlys respectively at the latest on 30 January 2009 are deferred for the same period as for the loan agreement described in item (ii) above and (v) that the Board of Directors and the Extraordinary General Meeting of the Company approves the necessary resolutions to implement the Private Placement and issue the New Shares, including but not limited to a reduction of the par value of the shares to NOK 1 per share. It is a condition that the agreements referred to above have been entered into prior to completion of the Private Placement, provided however, that the effectiveness of the agreements may be subject to completion of the Private Placement. No guarantees or assurances can be made that the conditions will be satisfied. In the event that the conditions are not satisfied within 28 February 2009, the Private Placement will be cancelled. The subscriptions made by DnB NOR Bank ASA and Sparebanken Nord-Norge in the Private - 4 -

5 Placement do not represent an undertaking to approve the amendment of the loan agreement referred to in item (ii) above in their capacity as one of the Banks nor for DnB NOR Bank ASA and obligation to provide the Bridge Loan referred to in item (i) above. As an alternative to maintaining their interests in the Convertible Loan on the revised terms described above, bondholders will be given the alternative offer further described in section 3 A below. 3. The Proposal for the holders of the Convertible Loan As part of the total restructuring package Hurtigruten proposes to give the holders of the Convertible Loan the opportunity to choose between two alternatives: A. Subscribe for ordinary shares and new bond Subscribe for an amount up to the current nominal value of the bonds held in the Convertible Loan in (i) new ordinary shares issued by the Company at NOK 1 per share for 50% of the amount and (ii) a new bond loan issued by the Company (the New Bond Loan ) for 50% of the amount. Subscribed amounts to be paid in cash. The Company shall have the right and obligation to redeem or re-purchase from such subscribers bonds in the Convertible Loan, at a redemption price of 100 % of the par value plus accrued interest up to and including 31 December 2008, for a nominal amount limited upwards to the total amount subscribed by the bondholder in new ordinary shares and the New Bond Loan within 30 days after the New Shares and the New Bond Loan have been issued. Terms of the New Bond Loan: Term of 36 months from disbursement No installments payable during the term of the loan Interest of 10% per annum payable in arrears at the expiry of every 12 months period No conversion right Terms and conditions otherwise to be based on the standard agreement of the Norwegian Trustee (in Norwegian Norsk Tillitsmann ASA ) B. Approve amendments to terms and conditions for the Convertible Loan The Company proposes to amend the terms and conditions of the existing Convertible Loan as follows in order to satisfy the conditions for completion of the Private Placement (the Proposal ): 36 months extension of the term of the Convertible Loan (i.e. new maturity date 15 June 2012) Interest free for 12 months, from 1 January 2009 to 31 December 2009, thereafter interest of 7% per annum payable at the repayment date of the Convertible Loan No installments payable during the term of the Convertible Loan Conversion price reset in accordance with 14.1 of the loan agreement.

6 4. Managers e NORSK TILLITSMANN ASA The Company has appointed Carnegie ASA ( Carnegie ) and Pareto Securities AS ( Pareto ) (together referred to as the Managers ) as its financial advisers in connection with the restructuring of its interest bearing debt and as managers of the Private Placement of New Shares and the New Bond Loan being offered to bondholders. Please contact Cato A. Holmsen (Carnegie) or Espen Clason (Pareto) if there are any questions. The offer to bondholders in the Convertible Loan not invited to participate in the Private Placement to subscribe New Shares and the offer to all bondholders in the Convertible Loan to subscribe bonds in the New Bond Loan will, subject to satisfaction of the conditions for completion of the Private Placement, be made after the Extraordinary General Meeting of the Company expected to be held in the end of January Evaluation of the proposed changes The Company proposes to increase the term of the Convertible Loan with 36 month. In addition it is proposed to make the Convertible Loan interest free for the next 12 months, and thereafter a coupon of 7 % p.a. will be rolled up and paid at the new maturity date. The holders of the Convertible Loan is also given the opportunity to subscribe for ordinary shares and a new bond loan in the Company, with a right of redemption/repurchase by the Company of its holdings of bonds in the Convertible Loan The Company's evaluation Hurtigruten ASA is facing a critical liquidity situation. Liquidity forecasts developed by the Company during the Fall 2008 conclude that the Company is dependent on completing a total financial restructuring solution. Towards this end, the Board and Management of the Company have throughout the Fall of 2008 developed a comprehensive action plan and financial restructuring package which is currently being implemented. Based on the discussions with key stakeholders the last months the Company believes the proposed restructuring plan takes into the account the interest of the Company s stakeholders. The Company would emphasise that the proposed financial restructuring package is a result of a long and demanding process and that the implementation of the package is vital for the continued operations of the Company The Loan Trustee s evaluation The Company proposes to defer instalments on its interest bearing debt with 36 months. Even though these deferred instalments are not fully coordinated in respect of time lag (i.e. implying that instalments on both the debt incurred by the limited partnerships (in Norwegian kommandittselskaper) and the syndicated bank debt, as well as the New Bond Issue, will fall due and be repaid before the proposed new maturity date of the Convertible Loan), this should not be considered as unacceptable. The Company and its directors have a liability to not repay debt if it knows that it will not be able to repay other debt. The Company offers the banks in the bank syndicate a 75 bps increase of its interest rate if the instalments are deferred. On the other hand, the Company proposes to make the exiting - 6 -

7 Convertible Loan interest free for the next 12 months, whereafter the coupon will be rolled up and paid at the new maturity date. However, The Company also offers the Bondholders to subscribe for a combination of ordinary shares and the New Bond Loan, and to repurchases the bonds in the Convertible Loan for those who make use of this offer. Based on the information given to the Loan Trustee in connection with this summons to the Bondholders meeting, a complete restructuring/turnaround of HRG seems absolutely necessary. During the recent years HRG has experienced deteriorating profitability. Main reasons are reduced strategic and operating focus, high investments, high cost public procurement agreements and a significant increase in bunker oil costs and financial expenses during the latest 24 months combined with a drop in passenger number during summer seasons. This development has led to a complete restructuring/turnaround of HRG with the following main elements; new strategic direction, new operational platform, and financial restructuring. HRG has worked to obtain an increase of revenues, a reduction of debt and costs and a new public procurement contract. Therefore, NTM recommends the Bondholders to approve the Proposal. Nevertheless, the Bondholders themselves must evaluate, based on all information given from the Company, whether the Proposal should be accepted. It is recommended that the Bondholders seek counsel from their tax advisors, legal advisors and financial advisors regarding the effect of the proposed restructuring plan and/or offer to subscribe for ordinary shares and bonds in the New Bond Loan. 6. Bondholders meeting: Bondholders are hereby summoned to a Bondholders meeting: Time: Place: Tuesday 13 January 2009 at hours (CET), At the premises of Norsk Tillitsmann ASA, Haakon VIIs gt 1, Oslo - 7th floor Agenda: 1. Approval of the summons. 2. Approval of the agenda. 3. Election of two persons to co-sign the minutes together with the chairman. 4. Request for change of the Loan Agreement: It is proposed that the Bondholders meeting resolve the following: A. The existing terms and conditions of the Convertible Loan are proposed to be amended as follows (the Proposal ): - 36 months extension of the term of the Convertible Loan (i.e. new maturity date 15 June 2012) - 7 -

8 -Interest free for 12 months, from 1 January 2009 to 31 December 2009, thereafter interest of 7% per annum payable at the repayment date of the Convertible Loan - No installments payable during the term of the Convertible Loan B. The Proposal is conditional upon the following: a. That all the conditions for the Private Placement described in Section 2 above shall have been fulfilled. b. That the Bondholders are given an offer to subscribe for ordinary shares and a new bond issue of the Company as set out in clauses 3.A. and 4 in the summons to this Bondholders meeting. C. Norsk Tillitsmann ASA is given the power of attorney to enter into the necessary agreements in connection with decisions made by the Bondholders meetings as well as to carry out the necessary completion work, including make other necessary amendments of the Bond Loan Agreements and collect necessary legal opinions on the transaction and payment structure and the tax consequences thereof. To approve the above resolution, Bondholders representing at least 2/3 of the Bonds represented in person or by proxy at the meeting must vote in favour of the resolution. In order to have a quorum, at least 2/10 of the voting Bonds must be represented at the meeting. If the proposal is not adopted, the Loan Agreement will remain unchanged. -ooo- Please find attached a Bondholder s Form from the Securities Depository (VPS), indicating your bondholding at the printing date. The Bondholder s Form will serve as proof of ownership of the Bonds and of the voting rights at the bondholders meeting. (If the bonds are held in custody - i.e. the owner is not registered directly in the VPS - the custodian must confirm; (i) the owner of the bonds, (ii) the aggregate nominal amount of the bonds and (iii) the account number in VPS on which the bonds are registered.) The individual bondholder may authorise the Norsk Tillitsmann to vote on its behalf, in which case the Bondholder s Form also serves as a proxy. A duly signed Bondholder s Form, authorising Norsk Tillitsmann to vote, must then be returned to Norsk Tillitsmann in due time before the meeting is scheduled (by scanned , telefax or post - please see the first page of this letter for further details). In the event that Bonds have been transferred to a new owner after the Bondholder s Form was made, the new Bondholder must bring to the Bondholders meeting or enclose with the proxy, as the case may be, evidence which the Norsk Tillitsmann accepts as sufficient proof of the ownership of the Bonds

9 For practical purposes, we request those who intend to attend the bondholders meeting, either in person or by proxy other than to Norsk Tillitsmann, to notify Norsk Tillitsmann by telephone or by (at set out at the first page of this letter) within 16:00 hours (4 pm) (Oslo time) the Banking Day before the meeting takes place. Kind regards Enclosure: Bondholder s Form Company Presentation dated 22 December 2008