Cecon gets approval to make interest payment on 8% bonds in kind

By Angela McDaniels

Tacoma, Wash., Sept. 19 - Cecon ASA received a waiver from the holders of 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.

The 8% bonds were issued in three tranches: tranche B, tranche C1 and tranche C2.

The company sought approval to make the Sept. 18 interest payment due on the 8% bonds in kind instead of in cash. It asked that bondholders waive their right to treat this as an event of default and their right to receive default interest.

Bondholders voted at a meeting at 4 a.m. ET on Sept. 19 in Oslo. There were enough bondholders present to form a quorum, and 100% of the votes were cast in favor of the proposal, according to a notice from bond trustee Norsk Tillitsmann ASA.

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 has 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 will be delayed.

Due to these circumstances, Cecon believes it would not be prudent to make the full cash interest payments due on the bonds.

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

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