Atlantic Offshore seeks bondholder approval to restructure its debt

By Angela McDaniels

Tacoma, Wash., Feb. 19 – Atlantic Offshore AS is asking the holders of its NOK 500 million of floating-rate senior bonds due 2018 to approve a proposed restructuring of its debt, according to a notice from trustee Nordic Trustee ASA.

Under the terms of the proposed restructuring, the bonds would be converted into NOK 250 million of amended and restated senior bonds and NOK 150 million of new subordinated callable convertible zero-coupon bonds, resulting in a NOK 100 million reduction in the principal amount of the bond issue.

Both issues would have no amortization payments and mature on Dec. 31, 2020.

The amended bonds would have an interest rate of 2% in cash and 3% in kind and a call option at par.

The new convertible bonds would be convertible into 44.9% of the issuer’s shares post-conversion, subject to dilution following additional capital increases up to NOK 50 million at a weighted average pre-money valuation of at least NOK 100 million.

The conversion right could only be exercised in full, and not in part. The conversion would have to be passed at a bondholder meeting with a two-thirds majority.

The company would have the option to call one-third of the new convertibles through June 30, 2018, subject to the right of the holders to convert their bonds, and/or 100% of the new convertibles any time prior to maturity, in which case the conversion rights would be canceled.

The new convertibles would be repayable at maturity in cash or shares at the company’s option.

The company needs pre-approval from bondholders representing a two-thirds majority no later than Feb. 26, and voting will occur at a bondholder meeting on March 4.

In order to implement the proposal, the company is also asking for a waiver of any right to declare the bonds to be in default and due for payment until the earlier of the date on which the proposal is implemented and March 31.

Secured debt

Under the terms of the proposed restructuring, all of the company’s senior debt would be amended to

• Reduce amortizations by 50% from Feb. 1 to Dec. 31, 2017 and by 25% from Jan. 1, 2018 to Dec. 31, 2018;

• Change all maturities to May 1, 2020;

• Permit free flow of cash between group companies (subject to compliance with minimum cash covenants and pledge of receivables/accounts in favor of the secured lenders if required) in 2016 to 2018 limited to the amounts of the amortization reductions and thereafter subject to consent from the relevant secured lenders;

• Include financial covenants requiring the company to maintain a 15% value-adjusted equity ratio calculated on the group level, a 2 times debt service coverage ratio calculated on the group level and NOK 15 million of free cash flow;

• Convert all long-term intercompany debt to equity in the relevant group companies;

• Pledge the currently unpledged shares in vessel-owning group companies in favor of the relevant secured lenders;

• Add parent company guarantees for secured debt of vessel-owning group companies that is not already guaranteed by the company; and

• Implement negative covenants restricting the company in its ability to pay dividends to shareholders, enter into contracts for newbuildings, acquire new vessels, charter new vessels, exercise rights under call options applicable as part of the new bond terms and obtain additional financial debt.

Other unsecured debt

Under the proposed restructuring, the company’s NOK 25 million of unsecured debt to SpareBank1 SR-Bank would be extended to Dec. 31, 2020 from March 2016.

The debt is guaranteed by the company’s main shareholder, the Ogreid family, which will provide additional liquidity in the form of a subordinated shareholder loan or equity to the company equivalent to any amount representing interest payments due on the unsecured loan above a level equal to the applicable cash interest of the restated bonds.

The Ogreid family has committed to inject NOK 50.1 million of new cash equity, resulting in a maintained control and roughly 99% ownership of the company, conditioned on no other existing shareholders participating in the equity issue.

Reasons for restructuring

The company said revenues from firm contracts for 2016 will cover its operating expenses, interest cost and a portion of the currently scheduled amortization payments for its secured debt.

However, its current liquidity situation does not allow it to service the bonds and its other commitments without new capital and upstreaming of cash from companies with the group, the company said.

Such upstreaming is not allowed under its bank debt and “thus the company would be facing imminent and severe liquidity issues without a restructuring,” according to the notice.

The company said it continues to work on its strategic review process, marketing the company as a whole or parts for sale, as well as exploring the possibility of a private placement.

However, the company said it has become clear that the outcome of the potential transaction scenarios will not provide a sustainable long-term solution for the group and that the completion of any transaction would not occur prior to the expiry of its waivers on Feb. 28.

As previously reported, the bondholders granted a temporary waiver of the market-adjusted equity ratio financial ratio covenant in October.

The proposed restructuring is a result of discussions with the secured lenders, an ad hoc group of bondholders and the company’s main equity holders and other stakeholders.

Atlantic Offshore is based in Kystbasen Agotnes, Norway. It owns and operates multirole rescue vessels and platform supply vessels.

© 2015 Prospect News.
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