Polarcus Limited: Successfully secures improved terms to Fleet Bank Facility and receives support for an extension of the USD 125 million Convertible Bond Issue

Polarcus Limited (“Polarcus” or the “Company”) (OSE: PLCS) announces that the Company has secured amended terms to the existing USD 410 million fleet bank facility agreement entered into with DnB ASA and DVB Bank SE, Nordic Branch, Garanti-instituttet for Eksportkreditt (GIEK), and Eksportkredit/Eksportfinans ASA (the “Fleet Bank Facility”). Furthermore, the Company has received support from the majority of bondholders to certain amendments to its USD 125 million 2.875% Secured Convertible Bond Issue 2011/2016 (the “Bond Issue”), including an extension of its maturity. 
The amendments to the Fleet Bank Facility improve the liquidity position of the Company by USD 59 million. The following amendments to the Fleet Bank Facility have been agreed with the financing parties (the “Bank Facility Amendments”):
  • Free cash covenant reduced to USD 25 million from USD 35 million until 31 March 2016.
  • A freeze of loan principal repayments from 01 March 2015 to 01 September 2015.
    • Total freeze amounts to USD 15 million.
    • The freeze amount to be added to the last repayment date for the loans maturing in August 2022, March 2023, March 2024, and June 2024.
  • A new 1-year Working Capital Facility of USD 25 million.
  • The threshold for collateral under the currency swap agreement related to Polarcus NOK 350/500 million Senior Unsecured Bond Issue 2014/2019 increased from USD 6.3 million to USD 15 million, releasing USD 9 million of liquidity to Polarcus. The currency swap agreement matures together with the corresponding bond in June 2019. 
  • Multi-Client permitted allocation amended to 30% of the Company’s vessel capacity, increased from maximum 20%, and prefunding amended to minimum 70% of the total multi-client cash investments, increased from minimum 50%.
  • The multi-client library and pledge of shares in the Group’s multi-client owning entities will be provided as security and will in combination with the existing security package provided by Polarcus under the Fleet Bank Facility serve as security for the following additional existing and new liabilities towards DnB; an existing USD 13 million bank guarantee provided by DnB in respect of Polarcus’ settlement with Western Geco, the new USD 25 million Working Capital Facility mentioned above, the amount of certain existing and all future bid- and performance guarantees to be issued by DnB under an existing USD 20 million guarantee facility agreement, and any exposure under the CSA with Polarcus up to USD 15 million.
Independent of the above agreements and on account of the current market environment the Company has decided to cold-stack Polarcus Nadia with immediate effect. This will result in certain additional cash savings for the Company in 2015. 
The Bank Facility Amendments are conditional on certain changes to the Bond Issue (the “Bond Issue Amendments”). The Bond Issue Amendments are subject to approval of a bondholders’ meeting, a summons is expected to be sent shortly. The Company has received indications from the majority of the holders of the bonds in the Bond Issue to vote in favor of the Bond Issue Amendments at the bondholders’ meeting. 
The Bond Issue Amendments comprise the following:
  • Extension of the maturity date until the earlier of: 
  • 27 April 2018 (24 months extension), and 
  • 2 months prior to the guarantees issued by the commercial banks securing the Fleet Bank Facility (the “Fleet Bank Guarantees”) mature (currently June 2017),
provided that if the financing parties have not committed to extend the Fleet Bank Guarantees prior to 27 April 2017, the Bond Issue shall mature on 27 April 2017.

  • Increase of interest rate to 5.6% per annum from date of implementation of the Bond Issue Amendments, payable quarterly, first time in April 2015.
  • Introduction of quarterly repayment instalments of USD 2.5 million, payable first time in April 2016 and quarterly thereafter.
  • As further consideration a consent fee equalling 1% of the principal amount of the Outstanding Bonds shall be earned by Bondholders upon effective date of the amendments set out in the Proposal and shall be payable by 31 December 2015 to Bondholders registered as Bondholders at the time of payment of the fee.
Commenting on the announcement, Rod Starr, Polarcus CEO, said: “The new liquidity has been provided in order to increase the Company’s operational flexibility in the current market environment, where the recent rapid decline in oil prices and consequent cautious spending by oil companies has negatively impacted the Company’s earnings. This challenging market environment has led to a more uncertain outlook with pressure on vessel rates and client payment terms, and is also the reason for our decision to cold-stack Polarcus Nadia, the only remaining vessel in our fleet equipped with thrusters as the main propulsion system. Part of the Company’s backlog in the first half 2015 also comprises multi-client projects. While these projects are highly prefunded, the investments tie up significant net working capital due to the associated payment terms. The current visibility in the second half of 2015 provides a positive cash flow from operations with further cash flow improvements into 2016 when working capital is projected to be freed up.”
A conference call will be hosted by Rod Starr, CEO, and Tom Henrik Sundby, CFO, to discuss the above announcement, today, 25 March 2015, at 13:00hrs CET (12:00hrs GMT). 
Please use the following numbers and Confirmation Code to dial-in to the conference call and to participate in the Q&A: 
Participant Confirmation Code: 3566065
Participant Telephone Numbers:
  Norway    + 47 2316 2771
  UK    + 44(0)203 450 9987
  USA    + 1718 354 1359
A replay of the conference call will be available after the event at www.polarcus.com under Investor Relations.  
About Polarcus
Polarcus (OSE: PLCS) is an innovative marine geophysical company with a pioneering environmental agenda, delivering high-end towed streamer data acquisition and imaging services from Pole to Pole. Polarcus operates a fleet of high performance 3D seismic vessels incorporating leading-edge maritime technologies for improved safety and efficiency. Polarcus offers contract seismic surveys and multi-client projects with advanced onboard processing solutions and employs over 600 professionals worldwide. The Company’s principal office is in Dubai, United Arab Emirates. For more information, visit www.polarcus.com 
The information included herein may contain forward-looking statements.  Forward-looking statements include all statements that are not historical facts, including but not limited to statements expressing or implying the Company’s intent, belief or current expectations with respect to, among other things, forecasts, estimates, and predictions. Such forward-looking statements necessarily involve risks and uncertainties and are dependent on assumptions, information, data or methods that may be incorrect or imprecise. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations proves to be inaccurate or is unrealized.  Some factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, developments in the oil and gas industry, the demand for seismic services, the demand for data from the Company’s multi-client library, currency risks, political risks, regulatory risks, and unexpected operational setbacks. For a further description of other relevant risk factors we refer to our 2013 Annual Report. The reservation is also made that inaccuracies or mistakes may occur in the information given above concerning the current status of the Company or its business. Any reliance on the information given above is at the risk of the reader, and Polarcus disclaims any and all liability in this respect.
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)