Prosafe SE (“Prosafe” or the “Company”) has entered into a letter of intent (“LOI”) with Axis Offshore Pte. Ltd. (“Axis”) for the potential acquisition of all outstanding shares in the two single purpose companies Axis Nova Singapore Pte. Ltd. (“Axis Nova SPV”) and Axis Vega Singapore Pte. Ltd. (“Axis Vega SPV”) (jointly the “New-Build Companies”), and 25% of the shares in Dan Swift Singapore Pte. Ltd. (the “Dan Swift Shares”). The agreed consideration for the acquisition will be USD 70 million (NOK 579.2 million) settled by Prosafe in kind, through the issuance of 585.8 million ordinary shares priced at NOK 0.30 per share, and a subordinated zero coupon convertible bond of NOK 403.4 million, convertible into 1,344.7 million shares at a conversion price of NOK 0.30 per share.
The offshore accommodation vessels market is currently in a challenging situation with significant growth in supply combined with a recession in the oil and gas industry. Prosafe’s strategy is to take a leading role to improve the situation in the market through cost reductions on all levels, fleet renewal, scrapping of older units, conversion of vessels to alternative uses and strategic consolidation.
Having followed the development of the Axis Nova and Axis Vega, which is built next to Prosafe’s own rigs at the same yard, Prosafe believes on first-hand knowledge that the contemplated transaction offers an attractive opportunity to acquire the two high specification, harsh environment semi-submersible new-builds at low risk. Prosafe considers the contemplated acquisition to be value enhancing from an industrial and financial point of view, and that it has limited risk since the transaction is further based on Axis Nova and Axis Vega coming with cancellation rights and refund bank guarantees of USD 60 million. The refund guarantee can be claimed in the event that Prosafe chooses to not take delivery of the new-builds due to weak market conditions, or otherwise. This will provide additional liquidity to the Company in a downside scenario.
Axis Nova SPV and Axis Vega SPV each control shipbuilding contracts with Cosco Qidong Shipyard (the “Yard”) for the construction and delivery on a fixed price basis of one advanced and modern semi-submersible accommodation rig to be used for harsh environments operations (the "Axis Nova" and the "Axis Vega", jointly the “New-Builds”).
As announced by Axis on 29 September 2016 and 31 October 2016 Axis Nova SPV and Axis Vega SPV have due to delays extending the original delivery schedules at the Yard entered into addendums to the respective construction contracts which include lay-up and standstill elements without any cost or payment to the Yard.
As previously announced, Prosafe already has a deferred delivery agreement with the Yard for the Safe Eurus (to Q4 2019, or such earlier time as required by the Company).
Prosafe will following the transaction have three accommodation vessels completed or nearing completion in a preserved, strategic stacking mode with Cosco Quidong Shipyard in China. The intention is to start negotiations with the Yard and other parties to find a solution for the delivery, financing and operations of the units such that Prosafe can take delivery on attractive terms upon a market recovery. Assuming the transaction and this process is completed, Prosafe envisage scrapping additional accommodation vessels in the period ahead, in addition to the three units already scrapped in 2016.
The contemplated transaction also includes that Prosafe will enter into a management contract for Axis’ converted monohull Dan Swift (in addition to receiving the Dan Swift Shares). The Dan Swift vessel will thereafter be marketed under the Prosafe banner and operated and managed as part of the Prosafe fleet. Prosafe sees additional upside from the marketing and operation of the Dan Swift on a standalone basis or as a supplement to the Company’s semis as the case may be, both from management earnings and the minority interest.
The contemplated transaction values Dan Swift at an enterprise value of USD 119 million, and assume that Dan Swift Singapore Pte. Ltd. upon closing will have balance sheet consisting of total assets of USD 129.0 million, of which USD 10.0 million in cash, a senior bank facility of USD 56.4 million, USD 32.5 million preference share capital with cumulative interest accrual and USD 40.1 million in equity. The senior bank facility is guaranteed by J. Lauritzen A/S, and will have no recourse to Prosafe. Dan Swift is currently in lay up in Denmark and based on the current balance sheet the unit will have an estimated financial runway into Q1 2019.
Axis shareholders include HitecVision Fund VI and LF Investment ApS (a company owned by Lauritzen Fondet), who respectively own approx. 66% and 34% of the shares in Axis.
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”Following the financial restructuring executed this summer, we announced Prosafe’s ambition to adjust the fleet to the market situation and taking the lead in consolidation. The efforts to complete this transaction represent a significant step in renewing its fleet and delivering on our strategic promises. We will continue to work hard to further enhance our fleet, reduce the operating cost and improve the commercial prospects of Prosafe through the ongoing reorganization and streamlining of our organization and operating model as well as engaging actively in initiatives for further growth”
“The addition of the Axis Nova and Axis Vega to our fleet will reinforce our renewal and high grading program. We look forward to further enhancing our relationship with Cosco Qidong and to work with their team to find an optimal solution for the preservation, marketing and eventual delivery and financing of the vessels. Further, a shareholding in and management of the Dan Swift will add flexibility to our offering and upside potential from the minority interest while also being in line with our ambitions of reorganizing our operating model into several strategic segments”, says Mr. Stig H. Christiansen, acting CEO for Prosafe SE.
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In summary the contemplated transaction will represent strategic and financial optionality to Prosafe that supports the Company’s defined strategy and ambitions. A presentation providing further details on the transaction is enclosed.
As of today there can be no certainty that a definitive agreement will be reached or that any transaction will ultimately be completed. The transaction, if agreed, is furthermore expected to be conditional inter alia on consent from the Company’s majority bank lenders, approval and issuance of consideration shares/bonds by an extraordinary general meeting in Prosafe in compliance with Cyprus law and regulations, approvals of changes to Dan Swift financing, merger clearance pursuant to applicable competition regulations (if any), as well as other customary closing conditions.
Clarksons Platou Securities and Schjødt act as advisors to Prosafe on the transaction. Danske Bank has delivered a fairness opinion on the terms of the transaction to the Board of Prosafe.
Stig H. Christiansen, Acting Chief Executive Officer and Robin Laird, Acting Chief Financial Officer will on 10 November 2016 at 10:00 a.m. CET host a conference call presenting the contemplated transaction.
Global conference call details:
Norway: +47 800 15 463
United Kingdom: +44 (0)808 238 9578
Audience US Toll Free: +1 (888) 771-4371
Audience US Toll: +1 (847) 585-4405
Confirmation number: 43 78 70 39
Conference call playback available from 10 November 2016 at 13:00 CET:
Playback Number: +1 (888) 843-7419
Passcode: 43 78 70 39#
Downloads: Axis Letter of Intent Presentation (PDF, 1.4 MB)
Larnaca, 10 November 2016
Georgina Georgiou, General Manager
For further information, please contact:
Glen Ole Rødland, Interim Chairman
Phone: +47 907 41 662
Stig Harry Christiansen, Acting CEO
Prosafe Management AS
Phone: +47 51 64 25 17 / +47 478 07 813
Robin Laird, Acting CFO
Prosafe Offshore Services Pte Limited
Phone: +65 81 27 21 01
Cecilie Helland Ouff, Senior Manager Finance and Investor Relations
Phone: +47 51 64 25 20 / +47 991 09 467
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.