Sevan Marine ASA (“Sevan Marine” or the “Company”) is pleased to announce that it has entered into an agreement with Teekay Corporation (“Teekay”) and holders of at least 2/3 of each of its outstanding bond loans regarding the sale of FPSO Sevan Voyageur, FPSO Sevan Piranema and FPSO Sevan Hummingbird (together the “FPSOs”) to Teekay, the raising of new equity in Sevan Marine and a restructuring of the Company’s indebtedness.
Bondholders holding at least 2/3 of each of Sevan Marine’s outstanding bonds have confirmed agreement to the terms set out in the agreement with Teekay by entering into a lock-up and voting agreement with the Company under which they have, inter alia and subject to certain terms and conditions, committed to vote in favor of the proposed transactions in their respective bondholders’ meetings and agreed not to exercise any acceleration rights available to them under the bond loans.
Under the terms of the agreement, which has been approved by the Boards of Directors of Sevan Marine and Teekay, and subject to certain conditions (see “Summary of key conditions for completion and indicative timetable” below), Teekay will:
• acquire from Sevan Marine three FPSO units; the FPSO Sevan Hummingbird (“Hummingbird“), the FPSO Sevan Piranema (“Piranema”) and the FPSO Sevan Voyageur (“Voyageur”), along with their existing charter contracts, for a total consideration of USD 668 million (the “Purchase Price”);
• finance the completion of the Voyageur upgrade;
• subscribe for new shares in Sevan Marine for a total consideration of USD 25 million in cash (the “Teekay Placement”) against receiving an ownership share of 40% on a fully diluted basis after completion of (i) an additional USD 25 million share issue pursuant to which existing shareholders and unsecured bondholders shall be given preferred rights to subscribe for new shares (the “Stakeholder Placement”, together with the Teekay Placement, the “Placements”) and (ii) a conversion of the Company’s unsecured bond debt (the “Debt Conversion”) (see “New equity issue and ownership structure” below); and
• enter into certain arrangements, including a cooperation agreement whereby Teekay will have the right to acquire future FPSO projects developed by Sevan Marine.
“We are pleased to announce this agreement for a long-term restructuring of Sevan Marine. We believe the transactions represent a good solution for all stakeholders of Sevan Marine, including our employees and customers, while supporting the further growth of the Company. Sevan Marine will also preserve its leading engineering and design capabilities and intellectual property. Together with Teekay as a strong industrial partner, we will be well positioned to benefit from opportunities in a growing FPSO market,” commented Carl Lieungh, Chief Executive Officer of Sevan Marine.
Sale of FPSOs and cancellation of bond loans
The total Purchase Price of USD 668 million for the three FPSOs, less certain transaction costs and the USD 230 million bank facility with ING secured inter alia with a first priority mortgage over Voyageur (the
“ING Facility”), will be used to repay and settle in full the following bond loans (including any accrued and unpaid interest) (the “Secured Bonds”):
• the USD 270 million senior secured callable bond loan 2007/2013, secured inter alia by a first priority mortgage over the Piranema (the “Piranema Bond”, and the holders thereof, the “Piranema Bondholders”), of which USD 227.5 million principal amount is currently outstanding;
• the NOK 870 million senior secured callable bond loan 2007/2012, secured inter alia by a second priority mortgage over the Voyageur (the “Voyageur Bond”, and the holders thereof, the “Voyageur Bondholders”), of which NOK 740 million principal amount is currently outstanding; and
• the NOK 625 million tranche and USD 100 million tranche senior secured callable bond loan 2010/2015, secured inter alia by a first priority mortgage over the Hummingbird (the “Hummingbird Bond”, and the holders thereof, the “Hummingbird Bondholders”), of which NOK 625 million and USD 100 million respective principal amounts are currently outstanding.
The Purchase Price will be paid upon Teekay’s completion of the acquisition of the respective FPSO, and is allocated as follows:
• Piranema: USD 165 million, which, after the deduction of certain transaction costs(1), shall be paid to the Piranema Bondholders as full repayment of the Piranema Bon
• Hummingbird: USD 179 million, which, after the deduction of certain transaction costs(1), shall be paid to the Hummingbird Bondholders as full repayment of the Hummingbird Bond.
• Voyageur: USD 94 million, which, after the deduction of certain transaction costs(1), shall be paid to the Voyageur Bondholders as full repayment of the Voyageur Bond. The remaining USD 230 million relates to the ING Facility, which is intended to be assumed by Teekay on completion of the acquisition of the Voyageur.
Teekay will provide Sevan Marine with all required funding for completing the upgrade of the Voyageur, which is expected to amount to USD 110 – 130 million, structured as a bridge loan facility (subject to certain additional funds being made available through the ING Facility) (the “Teekay Bridge Loan”), secured by inter alia a second priority mortgage over the Voyageur with the existing second priority mortgage in favor of the Voyageur Bond being released in exchange for a payment guarantee issued by Teekay (the “Teekay Voyageur Guarantee”). Teekay will release the Company from the Teekay Bridge Loan upon the completion of the sale of the Voyageur. Consequently, neither Sevan Marine nor the Voyageur Bondholders will incur any additional funding needs related to the cost of the Voyageur upgrade under the terms of the agreement provided fulfillment of the conditions for completion.
In addition to the Secured Bonds, Sevan Marine has the following bond loans outstanding:
• the NOK 700 million unsecured callable bond loan 2010/2014 (the “Unsecured Bond”), of which NOK 700 million principal amount is currently outstanding; and
• the USD 36.1 million senior secured callable bond loan 2011/2012, secured by a first priority share pledge over the shares in Sevan Drilling ASA held by Sevan Marine (the “Bridge Loan Bond”, and together with the Secured Bonds and Unsecured Bond, the “Bond Loans”), of which USD 36.1 million principal amount is currently outstanding.
(1) The aggregate transaction costs to be deducted from the amounts to be paid to the bondholders of the Secured Bonds are estimated to amount to approximately USD 8-9 million.
Sevan Marine has agreed with Teekay and the holders of the Unsecured Bond, with the consent of the holders of the Bridge Loan Bond, to repay the Unsecured Bond (including any accrued and unpaid interest) through (i) transfer of Sevan Marine’s holding of 96,000,000 shares (the “Drilling Shares”) in Sevan Drilling ASA to a newly formed entity that shall be owned by the holders of the Unsecured Bond (the “Unsecured SPV”), and which will assume all obligations related to the Bridge Loan Bond; and (ii) the Debt Conversion, pursuant to which the holders of the Unsecured Bond will receive a number of new shares representing 50% of the share capital of Sevan Marine prior to the proposed Placements, which corresponds to 10% of the pro forma share capital of Sevan Marine following completion of the proposed Placements (assuming full subscription of the Stakeholder Placement). Instead of being transferred to the Unsecured SPV at First Completion (as defined in “Summary of key conditions for completion and indicative timetable” below), the Drilling Shares may also be sold by the Company following the extraordinary general meeting (“EGM”), with the proceeds of the sale being used to prepay the Bridge Loan Bond and the balance being transferred to the holders of the Unsecured Bond on First Completion.
Completion of the transfer and a potential disposal of the Drilling Shares are, inter alia, subject to obtaining acceptance from the financial advisors involved in the Initial Public Offering of Sevan Drilling ASA related to the current lock-up arrangements. It is intended that the Unsecured Bond and the Bridge Loan Bond shall be settled on or as soon as practically possible after First Completion.
It is expected that Norsk Tillitsmann ASA, as trustee for the Bond Loans, will publish a release on Stamdata (www.stamdata.no) regarding an inter-bondholder agreement entered into among the holders of the Bond Loans which, inter alia, contains information on the distribution of certain proceeds among the holders of such bonds and thus must be read by such holders in connection with this release.
New equity issue and ownership structure
Sevan Marine intends to raise USD 50 million in new equity to secure liquidity after the contemplated asset sales and secure capital for future growth. Teekay will subscribe for new shares in Sevan Marine for a total consideration of USD 25 million in cash in the Teekay Placement against receiving an ownership share of 40% on a fully diluted basis (assuming full subscription of the proposed Placements). The existing shareholders and the holders of the Unsecured Bond shall be given preferred rights to subscribe for new shares for a total consideration of USD 25 million in cash on the same terms as Teekay in the Stakeholder Placement.
The existing shareholders of the Company (as at a record date to be determined by the Company) shall have the right to be allocated, on a pro rata basis in accordance with their holding of shares in Sevan Marine, 75% of the USD 25 million in new equity to be issued. The holders of the Unsecured Bond shall have the right to be allocated, on a pro rata basis in accordance with their shareholding in Sevan Marine following the Debt Conversion, 25% of the USD 25 million in new equity. Oversubscription will be allowed. The pro forma ownership structure following the Placements will be as follows (assuming full subscription by the existing shareholders and the holders of the Unsecured Bond in the USD 25 million Stakeholder Placement):
• Teekay will hold 40% of the Company’s share capital;
• existing shareholders will hold 40% of the Company’s share capital; and
• holders of the Unsecured Bond will hold 20% of the Company’s share capital.
A reduction in the Company’s share capital and the nominal value per share will be required to complete the Placements.
The Teekay Placement will be completed prior to completion of the Stakeholder Placement. The completion of the Teekay Placement will trigger a mandatory offer obligation for Teekay on the existing share capital of Sevan Marine. The Stakeholder Placement will be completed after expiry of the acceptance period for a mandatory offer launched by Teekay.
Further information related to the Placements will be published in due course. The Company will publish a prospectus in connection with the Placements which will be approved by the Norwegian Financial Supervisory Authority of Norway prior to the start of the subscription period.
Teekay and Sevan Marine will enter into a cooperation agreement relating to joint marketing of offshore projects, the development of future projects and the financing of such projects which will obligate Sevan Marine to offer any FPSO or other offshore projects and associated charter contracts to Teekay at fair market value. However, Sevan Marine will be free to offer such projects to third parties should Teekay decide not to accept the offer. The cooperation agreement will only relate to lease contracts. Sevan Marine will be free to enter into contracts relating to licensing of the Company’s offshore unit design and technology.
Teekay and Sevan Marine will also enter into reciprocal service agreements for access to each other’s resources related to engineering, project and technology development, assistance with redeployment and other FPSO-related work, subject to availability and further terms and conditions to be agreed by the two parties.
Sevan Marine will disclose further details related to the cooperation agreement prior to the planned EGM.
Summary of key conditions for completion and indicative timetable
The proposed transactions are subject to customary closing conditions, including but not limited to:
• approval by the existing shareholders in an EGM with 2/3 majority;
• formal approval by the bondholders in bondholder meetings in each of the Bond Loans;
• consent from Sevan Marine’s FPSO charterers;
• approvals by relevant regulatory authorities;
• consent from Sevan Marine’s syndicate of banks being led by ING Bank;
• consent from the agent and security trustee responsible for the USD 83 million debt facility agreement described below;
• release of guarantee obligations for Sevan Marine group entities in respect of Sevan Drilling group obligations; and
• no material adverse effect occurring with respect to the FPSOs or the business of Sevan Marine.
Sevan Marine will call for an EGM as soon as practically possible. The intention is to hold the EGM in early November 2011.
Bondholders’ meetings to receive formal approval by the bondholders in each of the Bond Loans are expected to be held prior to the EGM.
It is a condition that the sale of the Piranema and the Hummingbird shall be completed on or before November 30, 2011. It is the Company’s intention that these sales are completed as soon as practically possible following fulfillment of the relevant closing conditions (“First Completion”). After First Completion, all debts under the Piranema Bond and the Hummingbird Bond will be settled with the proceeds from the respective sales of the Piranema and the Hummingbird. It is intended that the completion of the settlement of the Unsecured Bond and the Bridge Loan Bond (both as defined and described above) through the Debt Conversion and the transfer of the Drilling Shares and novation of the Bridge Loan Bonds to the Unsecured SPV (as defined above) shall take place on or as soon as practically possible following First Completion.
The sale of the Voyageur and settlement of the Voyageur Bonds shall be completed when the FPSO is deployed at the Huntington field which is expected to take place during the third quarter of 2012.
Completion of the sale of the Voyageur is conditional upon delivery having taken place no later than on December 31, 2012. However, in accordance with the terms of the Teekay Voyageur Guarantee, the part of the Purchase Price allocated to the FPSO Voyageur, being USD 94 million less the deduction of certain transaction costs, shall be payable to the holders of the Voyageur Bond by Teekay upon the earlier to occur of (i) the date that is 12 months after the date of the First Completion, (ii) December 15, 2012, and (iii) the date of the sale of the Voyageur.
Strategic effects for Sevan Marine and other disclosures
Strategic effects for the business of Sevan Marine:
The transactions imply that significant parts of the Sevan Marine Group’s current operating and revenue generating activities are divested. Following completion of the restructuring, Sevan Marine will have a new “asset-light” structure with reduced capital requirements. Sevan Marine will be a substantially net debt free company consisting of:
• two partially completed hulls (#4 and #5) currently located at the COSCO Shipyard in China (which will be secured in favor of Teekay with respect to the Teekay Bridge Loan);
• the licensing agreement with ENI;
• engineering and offshore project development businesses, including the existing shareholdings in the KANFA group;
• intellectual property rights, including offshore unit design patents; and
• approximately USD 50 million in equity proceeds following the completion of the Placements (less certain fees and expenses).
In addition, Sevan Marine will retain the USD 83 million debt facility (of which USD 37.9 million principal amount is outstanding as at the date hereof), which is serviced in full by revenue earned under an existing licensing arrangement.
Together with Teekay, as a strong industrial partner, the Company will be well positioned to benefit from opportunities in a growing FPSO market. Going forward, Sevan Marine will focus on applying its engineering, project development, and marketing capabilities to develop new offshore projects, and developing opportunities to earn fees from licensing its intellectual property rights.
Governance and management:
Sevan Marine will continue to operate as a publicly-listed company on the Oslo Stock Exchange following the restructuring.
Teekay shall appoint two Directors to the Board of Directors of the Company.
Financial data in respect of the transactions:
The assets being divested through the transactions have been part of the Floating Production reporting segment of Sevan Marine, but have not been subject to separate financial reporting. Pro forma financial data illustrating the effects of the restructuring will be provided in an information memorandum/prospectus prepared in accordance with applicable rules in conjunction with the restructuring and the Placements.
Off-balance sheet obligations relating to the divested business:
As parent company of the Sevan Marine Group, Sevan Marine has guaranteed for correct fulfillment of various contracts entered into by its subsidiaries in respect of the FPSOs, including, but not limited to, charter contracts for the FPSOs, upgrade contracts for the Voyageur, loan agreements, performance guarantees towards technical managers of the units. The transactions contemplate that Sevan Marine will be released from such obligations as a result of the transactions.
Under the terms of the agreement with Teekay it is contemplated that Teekay shall assume Sevan Marine employees involved in the operation of the FPSOs as required by law or as further agreed.
Agreements for the benefit of management and Directors entered into in connection with the transaction:
No particular agreements providing benefits for members of management or Directors of Sevan Marine have been entered into in connection with the transactions.
Description of the business of the FPSOs
The 2007-built Piranema is currently operating under a long-term charter to Petrobras S.A. on the Piranema field located offshore Brazil. The charter includes a firm contract period ending in March 2018 followed by up to 11 one-year extension options.
The 2008-built Hummingbird is currently operating under a charter to Centrica Energy Upstream (Centrica) on the Chestnut field in the UK sector of the North Sea. The Hummingbird contract was recently extended to September 2012 and thereafter includes one six-month extension option, one three-year extension option, and two one-year extension options.
The 2009-built Voyageur operated successfully on the Shelley field in the UK sector of the North Sea from August 2009 to August 2010. The unit is currently undergoing an upgrade prior to commencement of its charter contract with E.ON Ruhrgas UK E&P (E.ON) on the Huntington field in the UK sector of the North Sea. This charter is expected to commence in the third quarter of 2012 for a firm period of five years with extension options.