Havila nixes consent bids, hopes to reach agreement with bondholders

By Angela McDaniels

Tacoma, Wash., Jan. 19 – Havila Shipping ASA canceled the consent solicitations for its senior bond issue 2012/2016, senior secured callable bond issue 2011/2017 and senior secured callable bond issue 2010/2016, according to a notice from bond trustee Nordic Trustee ASA.

The company blamed uncertainly about whether the proposal had enough support to pass.

The company said it still aims to reach an agreement with its bondholders by Jan. 31.

As reported on Jan. 5, the company said it has been significantly impacted by the downturn in the offshore oil industry and foresees “severe” financial challenges for 2016 through 2018.

According to the company, it has no readily available means of refinancing its near-term debt maturities, its cash flow from operations is not enough to meet the current amortization schedules of its debt, and it does not expect the market to improve materially in the short to medium term.

As a result, the company is working toward a refinancing solution that will allow it maintain enough liquidity to operate through 2018.

Bond issue 2012/2016

Under the canceled proposal, the company was asking holders of the bond issue 2012/2016 to agree to amendments to

• Extend the maturity date to Dec. 31, 2020;

• Replace the current call option with an option for the company to redeem the bonds at par plus accrued interest at any time;

• Lower the interest rate to the NOK one-year swap rate plus 550 basis points;

• Make interest payable in kind through Dec. 31, 2018. After that, interest would be payable in cash only if there is a positive cash flow to service such interest and there is no default under the group’s secured debt;

• Reduce the par value of the bonds to NOK 1.00;

• Delete clauses concerning dividends and other distributions, market-adjusted equity ratio and ratio of gross unsecured interest-bearing debt to unencumbered assets and replace them with covenants that prohibit the payment of dividends or other distributions on shares, prohibit share repurchases and require the group to maintain positive working capital; and

• Add new clauses that, among other things, prohibit the company from borrowing any new loans, making new investments or grant security for any unsecured debt without the prior consent of the lenders under its secured facilities.

Bond issue 2011/2017

The company was seeking approval to amend the bond agreement for the bond issue 2011/2017 to, among other things

• Change the maturity date to June 30, 2020;

• Change the amortization schedule to NOK 852,843 on each interest payment date from March 2016 to December 2018 and NOK 3.75 million on each interest payment date thereafter, with the remainder due at maturity;

• Replace the current call option with an option for the company to redeem the bonds at par plus accrued interest at any time;

• Beginning March 30, 2017 (the original maturity date), change the interest rate on the fixed-rate tranche to the same interest rate on the floating-rate tranche. The fixed rate is 8.6%;

• Delete the clauses concerning dividends and replace it with a covenant that prohibits the payment of dividends or other distributions on shares and share repurchases;

• Delete the clause concerning market-adjusted equity ratio and replace it with a covenant that requires the group to maintain positive working capital;

• Add a new clause that entitles the bondholders to a back-end fee of 1% of the aggregated deferred installments (not including the agreed balloon payments) to be paid on June 30, 2020 on the basis of the aggregated deferred installments accumulated from Jan. 1, 2016 through Dec. 31, 2018; and

• Add new clauses that, among other things, prohibit the company from borrowing any new loans, making new investments or grant security for any unsecured debt without the prior consent of the lenders under its secured facilities and add a cash sweep obligation.

Bond issue 2010/2016

Finally, the company sought approval to amend the bond agreement for the bond issue 2010/2016 to, among other things

• Change the maturity date to June 30, 2020;

• Change the amortization schedule to NOK 799,540 on each interest payment date from February 2016 to November 2018 and NOK 3,515,625 on each interest payment date thereafter, with the remainder due at maturity;

• Replace the current call option with an option for the company to redeem the bonds at par plus accrued interest at any time;

• Delete the clauses concerning consolidated value-adjusted equity ratio, market value of the vessel and interest coverage ratio and replace them with covenants that prohibit the payment of dividends or other distributions on shares and share repurchases, require the group to maintain positive working capital and require the company to ensure that the market value of the vessel is at least 100% of the outstanding amount of the bonds beginning Jan. 1, 2017;

• Add a new clause that entitles the bondholders to a back-end fee of 1% of the aggregated deferred installments (not including the agreed balloon payments) to be paid on June 30, 2020 on the basis of the aggregated deferred installments accumulated from Jan. 1, 2016 through Dec. 31, 2018;

• Add new clauses that, among other things, prohibit the company from borrowing any new loans, making new investments or grant security for any unsecured debt without the prior consent of the lenders under its secured facilities and add a cash sweep obligation.

Waiver sought

In each case, the company was also asking for a temporary waiver of any events of default under the bond agreements until the earlier of the effectiveness of the amendments or March 15.

The effectiveness of the amendments was subject to approval by all of the company’s financial creditors and the completion of an equity issue producing at least NOK 200 million of proceeds by March 15.

Bondholders were scheduled to vote at a meeting at 7 a.m. ET on Jan. 20 in Oslo.

In order to have a quorum, at least half of the bonds had to be represented at each meeting. To approve the proposal, votes in favor of the proposal were needed from bondholders representing more than two-thirds of the bonds represented at each meeting.

Havila provides supply services to the offshore oil and natural gas industry. It is based in Fosnavag, Norway.

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