Deep Sea Supply PLC is pleased to announce extensive amendments to its loan facilities and an agreement with DPC Serviços de Óleo e Gás relating to a roll-up of DPC’s 50% stake in the joint venture DESS BTG currently owned 50/50 between DPC and the Company.
The refinancing will preserve the Company’s liquidity position and better position the Company through the current market downturn. Through a roll-up of DPC’s stake in the DESS BTG joint venture, the Company exchanges the remaining 50% ownership in the joint venture’s fleet of 21 OSV’s at favorable terms, for limited cash proceeds and dilution through the issuance of DESS common shares and warrants to DPC.
Commencing May 31, 2016 the Company will not pay scheduled amortizations under substantially all of its bank facilities until March 31, 2018, including bank debt in DESS BTG, deferring a total amount of up to USD 68 million. Further, the minimum value adjusted equity ratio and value adjusted equity covenant will be removed, minimum consolidated free cash will be reduced to USD 20 million and the minimum value covenant will be reduced to 100% in the same period. A cash sweep mechanism will enable the Company to deleverage when the market recovers. The principal margins on the loans are unchanged and on average 2.8%, however the Company will pay a slightly increased margin of on average 4.25% for the, at any given time, deferred amount under the loan facilities. The loan facilities maturing in October 2016 will be extended until October 2018, and as such, the Company will not have any material debt maturities over the next two years. Further, Ship Finance has agreed to reduce the bareboat hire from June 2016 through May 2018 with approximately USD 17 million in aggregate against an extension of the bare boat period with 3 years in addition to a 50/50 profit-split. Following the refinancing, the Company will be a guarantor for all of its outstanding debt, including Ship Finance.
In exchange for DPC’s 50% ownership in the DESS BTG joint venture, the Company will issue 30,133,022 new common shares, 10,000,000 warrants and pay a cash settlement of USD 2 million. Following the share issue, the Company will have an aggregate of 291,330,216 common shares outstanding. The warrants will be exercisable into common shares in the Company at any time during a period of 36 months at an exercise price of NOK 1.24 per share. Following the transaction, the DESS BTG joint venture will be 100% owned by the Company and comes with attractive finance attached and with limited fixed amortization over the next 22 months it represents an attractive growth opportunity for the Company at a historical low point in the cycle.
The refinancing of the debt facilities and the roll-up of the joint venture are both subject to standard closing conditions, including approval by the Company’s shareholders of the issuance of the warrants at an extraordinary general meeting and anti-trust approval. An extraordinary general meeting will be called for, and closing of the transaction (including issue of the consideration shares and warrants) is expected to take place during Q3 2016. An information memorandum with further details on the transaction will be prepared and published in accordance with the Norwegian Securities Trading Act and the Oslo Stock Exchange’s Continuing Obligations.