Kistefos holders OK shifting floaters to Western Bulk for equity issue

By Susanna Moon

Chicago, June 27 – Kistefos Equity Operations AS secured the needed majority approval to transfer its NOK 300 million of floating-rate senior bonds to operating subsidiary Western Bulk Chartering AS.

The meeting was held at 7 a.m. ET on June 27 in Oslo.

By obtaining the consents, the company met the condition for closing its NOK 167 million private placement in Western Bulk Chartering AS, with settlement by June 29, according to a company notice.

As announced June 13, Kistefos sought holder consent to amend the notes and grant the transfer of the bonds originally issued by Western Bulk ASA in order to facilitate the sale of stock.

To form a quorum, at least half of the bonds needed to be represented at the meeting. To pass, the measure required votes from holders of at least two-thirds of the bonds represented at the meeting.

As previously announced, Western Bulk Chartering was planning the $15 million to $20 million equity issue because of its worsening financial position, caused by a challenging market with historically low dry bulk charter rates.

Some creditors had objected to the sale of Western Bulk Charting to Kistefos, and there was a risk that the bankruptcy estate or creditors could take legal action to challenge the sale, which could make investors reluctant to invest new equity in Kistefos.

The company’s solution was to offer the investors an investment in Western Bulk Chartering directly rather than in Kistefos. Because Kistefos’ ownership in Western Bulk Chartering will be diluted by the equity transaction, Kistefos proposed replacing itself as borrower with Western Bulk Chartering.

In addition to transferring the bonds to Western Bulk Chartering, Kistefos sought to increase the carve-out for its credit facility to $20 million from $8 million and for permitted security to $20 million from $10 million in order to increase its credit facility to fund working capital fluctuations.

The transfer of the bonds was conditioned on the company raising at least $15 million in the proposed equity issue.

Kistefos assumed Western Bulk’s obligations under the bond issue earlier this year when it purchased Western Bulk Chartering AS from Western Bulk, which later changed its name to Bulk Invest ASA.

As previously reported, the bondholders approved the transfer of the bonds to Kistefos from Western Bulk in February. They also approved amendments that extended the maturity date by two years to April 2019, reduced the coupon margin to 325 basis points from 675 bps and amended and removed some covenants.

Kistefos Equity Operations is indirectly wholly owned by Kistefos AS, which is an Oslo-based investment company with a portfolio in financial services, telecom, shipping, offshore and other industries.

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