Presentation to bondholders. Restructuring proposal

Transcription

1 Presentation to bondholders Restructuring proposal

2 Disclaimer This presentation (the Presentation ) has been produced by Frode Bjørn AS (the Company or Frode Bjørn, and together with its subsidiaries, the Group ), the parent company of E Forland AS (the Issuer ), exclusively for information purposes for investors in the Issuer's bond issue FRN E Forland AS Senior Secured Callable Bond Issue 2013/2018 with ISIN NO (the Bond Issue ). This Presentation is furnished by the Company, and it is expressly noted that no representation or warranty, express or implied, as to the accuracy or completeness of any information included herein is given by any advisors of the Company, and that nothing contained in this Presentation is or can be relied upon as a promise or representation by any advisors of the Company, who disclaim all and any liability, whether arising in tort or contract or otherwise. By receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the financial markets, the markets in which the Group operates (including the value of the Group's vessels) and the market position of the Group and that you will conduct your own analysis and be solely responsible for forming your own view of the current and potential future performance of the Group s business. The markets in which the Group operates are undergoing severe difficulties and all vessel values in the Presentation are uncertain. THE FUTURE DEVELOPMENT OF THE MARKETS IN WHICH THE GROUP OPERATES IS UNCERTAIN, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE GROUP TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING BUT NOT LIMITED TO RISKS OR UNCERTAINTIES ASSOCIATED WITH THE GROUP S BUSINESS, SEGMENTS, ASSETS, THE CONTRACT COVERAGE OF THE VESSELS, DEVELOPMENT, FINANCING AND RELATIONS WITH CUSTOMERS. THESE AND OTHER UNCERTAINTIES ARE CLOSELY RELATED TO THE ASSUMPTIONS USED IN THIS PRESENTATION. SHOULD SUCH UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION.

3 Disclaimer This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Group and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words believes, expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. Neither the Company, any advisors of the Company nor any of their parent or subsidiary undertakings or any such person s officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. This Presentation is not for distribution in the United Kingdom, the United States, Canada, Japan or Australia or any other jurisdiction where the distribution of this Presentation could involve a breach of laws or regulations or involve any registration requirement or any requirement for the publication of a prospectus, registration document or similar. This Presentation does not constitute an offer to sell or a solicitation of an offer to buy any securities (including the bonds in the Bond Issue) in any jurisdiction. The contents of the Presentation are not to be construed as financial, legal, business, investment, tax or other professional advice. Each recipient should consult with its own professional advisors for any such matter and advice. This Presentation speaks as of the date set out on its front page. Neither the delivery of this Presentation nor any further discussions between any of the Group, any advisors of the Company and the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Group since such date. Neither the Company nor any advisors of the Company intend to assume or assume any obligation to update the Presentation or any of the information included herein. This Presentation is governed by Norwegian law. All disputes related to this Presentation shall be finally decided by arbitration according to the Norwegian Arbitration Act. The place for the arbitration shall be Oslo and the language for all documentation and proceedings related to the arbitration shall be Norwegian. The dispute, the arbitration proceedings and the arbitral award shall be confidential.

4 Group overview The Forland Shipping group (the Group ) is a Norwegian shipping company with +40 years legacy The Group has a fleet of two wholly-owned subsea vessels, Forland Inspector (formerly Lewek Inspector) and Fugro Saltire Majority of management and technical functions are outsourced to third party providers The vessels are financed by Forland Inspector o NOK 365 million term loan from banks Fugro Saltire o NOK 359 million senior secured bond maturing in September 2018

5 Fleet comprising two high-quality subsea vessel Forland Inspector (former Lewek Inspector) Specifications Built by Havyard, delivered in m x 22m 150 tonne crane Accommodation for 106 people 1,002 m 2 deck area Moonpool 2 x LARS Built according to full Statoil vessel specifications On time-charter for 9 months + 3 months option from August 2017 Fugro Saltire Specifications Built by Bergen Group, delivered in m x 24 m 150 tonne crane Accommodation for 105 people 1,000 m 2 deck area Moonpool 2 x LARS On contract with Fugro to July 2018, which is to be terminated from

6 Background for restructuring In February 2017, EMAS AMC, the charterer of Forland Inspector, filed for bankruptcy. EMAS AMC did not pay charter hire from November 2016 Following the bankruptcy, the vessel has mostly remained idle. On 3 August 2017, the vessel was awarded a new 9 months firm contract with a reputable client. However, the dayrate is not sufficient to service schedule instalment Furthermore, on 2 August 2017, the bareboat charter for Fugro Saltire was terminated effective from 1 by Fugro. The Group will pursue any potential claims for losses arising out of the termination from Fugro The dayrates in the subsea segment is likely to remain relatively low in the medium term, and it is hence unlikely that new contracts will have dayrates sufficient to service interest and instalments in full Liquidity in the Group is approx. NOK 50 million, which is insufficient to carry the Group through to a market recovery Forland Subsea AS (Forland Inspector) likely to need additional capital from November 2017 Assets sales are not likely to fully recover debt on the vessels in the current market environment. Hence, the Group believes that a restructuring of the Group s debt is the best alternative for all stakeholders, including the bondholders in E Forland AS Therefore, the Group needs to raise new liquidity and adapt the existing instalment profile to reflect the current market sentiment. The Group has already reached an agreement with the secured lenders in Forland Subsea AS

7 Cash flow projection pre restructuring based on current market terms throughout the forecast period NOKm Forland Subsea AS will run out of cash during Q E Forland AS will run out of cash during H2 2018, assuming no losses on any claims arising from Fugro termination Main assumptions: Fugro Saltire extended on USD 20k/day dayrate from August 2018 Full compensation from Fugro from early termination received over contract period Docking cost of NOK15m for Fugro Saltire in Q2 18 Forland Inspector extended on USD 23.5k/day dayrate from May 2018 Bond maturity extended with existing repayment levels Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Forland consolidated Fugro Saltire Forland Inspector

8 Agreement with In Nord Vest AS In order to attract new equity, the principal owner of Frode Bjørn AS, Torpevikvegen 4-6 Eiendom AS, will sell 100% of Frode Bjørn AS to In Nord Vest AS after a restructuring has been completed In Nord Vest AS will contribute with NOK 100 million in new equity into the Group as part of the restructuring (full amount subject to approval of both bank and bond restructuring) In Nord Vest AS is an investment company specialising in investments in OSV vessels controlled by Åge Remøy, Magnus Roth and Torsteinn Mar Baldvinsson, owning one third each Experienced group of OSV operators and industrial investors o Åge Remøy founder of Rem Offshore in CEO and main owner of the company until merged with SolstadFarstad in Rem Offshore had among the lowest operating costs and strongest EBITDA costs among its peers o Magnus Roth and Torsteinn Mar Baldvinsson are experienced investors and operators in the maritime industry In Nord Vest AS has built a management organisation in Fosnavåg, with OSV Management AS as the operating company. OSV Management AS has already all necessary DNV certifications and approvals for full management of OSV vessels Management organization and team with extensive track record with operation world wide and broad customer base

9 Group structure (future ownership) Torpevikvegen 4-6 Eiendom AS In Nord Vest AS 100% (0%) 0% (100%) Frode Bjørn AS 100% 100% 100% 100% 100% Forland Subsea II AS E Forland AS Forland Shipping AS Seisranger AS Forland Subsea AS TC contract with Fugro entitled to claims from Fugro BBCP Shipowner of Fugro Satire Management company Shipowner of Forland Inspector (former Lewek Inspector) E Forland AS 13/18 FRN C bond EKN term loan facility Separate contracts and financing arrangements in E Forland AS and Forland Subsea AS Fully ring-fenced structures and assets (pre and post restructuring) Both entities have parent guarantees from Frode Bjørn AS, which is a holding company with limited operating activity ( ) denotes ownership post final transaction

10 Summary Fugro Saltire restructuring Existing Terms Bond New Terms Bond Maturity 4 September June 2021 Covenants Issuer level: Minimum Market Value of 120% Minimum cash of NOK 20 million Group level: Minimum book equity of 25% Value adjusted equity ratio of 30% Minimum liquidity of NOK 20 million Issuer level: 31 December June 2021: MVC of 100% Minimum liquidity of NOK 10 million Group level: Removed Margin 3m NIBOR bps Unchanged Amortisation Quarterly instalments of NOK 9 million (last six quarters prior to maturity / from March 2017) Replaced by cash sweep mechanism Cash sweep None Same principle as bank (see next page); All above threshold of base case liquidity forecast plus NOK 10 million Up-front debt repayment NOK 35 million Debt service H H N/A 2) Instalments (incl. upfront repayment): NOK 44 million Interest: NOK 105 million Total: NOK 149 million 1) Conditions Precedent NOK 100 million in new equity of which NOK 30 million will be injected as new equity into the Issuer Change of Control Allow for In Nord Vest AS to own 100% of the Group without triggering any CoC clause 1) Applying a swapped fixed interest rate of 8.00% throughout the runway period 2) N/A due to extension of bonds beyond existing maturity

11 Summary Forland Subsea restructuring Existing Terms Term loan New Terms Term loan Maturity 14 November 2025 Unchanged Covenants Minimum Market Value of 125% Free liquidity and positive WC covenants Minimum book equity Value adjusted equity Consolidated parent LTM EBITDA to gross interest-bearing debt Borrower level: 31 December June 2021: MVC of 100% Minimum liquidity of NOK 10 million until June 2021 Margin 5.34% fixed Unchanged Amortisation Semi-annual instalments of NOK 21.4 million Semi-annual instalments of NOK 4.3 million (80% reduction) Cash sweep None All above threshold of base case liquidity forecast + NOK 10 million Up-front debt reduction NOK 10 million Debt service H H Instalments: NOK 171 million Interest: NOK 62 million Total: NOK 206 million Instalments (incl. upfront reduction): NOK 47 million Interest: NOK 73 million Total: NOK 120 million Conditions Precedent NOK 60 million in new equity injected - not subject to a successful restructuring of the bonds Change of Control Allow for In Nord Vest AS to own 100% of the Group without triggering any CoC clause

12 Cash flow projection post restructuring Runway beyond 2020 when assuming current low-level contract environment NOKm Main assumptions: Same operating assumptions as current as is case, including NOK 15 million docking Restructuring implemented as outlined on p. 8 NOK 30 million into E Forland AS similar support to Forland Inspector, remainder of new liquidity kept in Frode Bjørn AS to support each subsidiary Cost levels post restructuring: Forland Inspector: Operations (warm): NOK 3.8m / month Finance: NOK 2.0m / month Breakeven dayrate: NOK 198k/day Fugro Saltire: Operations (warm): NOK 4.1m / month Finance: NOK 2.2m / month Breakeven dayrate: NOK 211k/day Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Forland consolidated Fugro Saltire Forland Inspector Note: Applying a swapped fixed interest rate of 8.00% throughout the runway period (vs. 3M NIBOR % margin) for the bond

13 Merits of restructuring proposal Secures service of interest and parts of instalments in challenging market environment Interests serviced on original terms Total debt service in line with debt service to banks until new bond maturity New, financially strong owner with comprehensive industry experience and consolidation agenda participating with new equity Ensures sufficient stability and flexibility for Forland Shipping to manoeuvre through the downturn and continue to focus on finding long-term charterers for its high quality tonnage Substantial capitalization of E Forland AS and the guaranteeing parent company Bank restructuring not subject to Bond amendment (but only a reduced amount of equity will be injected into bank borrower if bond amendment is not approved)