Norway’s Fjord Line gets bondholder consent to amend bonds due 2016

By Tali Rackner

Norfolk, Va., Dec. 1 – Fjord Line AS received 93.24% of bondholder notes at its Monday meeting, adopting the proposed amendments to its senior unsecured bond issue due 2016, according to a notice from bond trustee Nordic Trustee ASA.

As previously reported, the company, an operator of short sea cruise ferries in Norway, said that it has incurred increased costs, disturbance of its cruise schedule and weakened profitability due to the delay in the delivery of a new vessel. In addition, rudders were incorrectly installed on two ferries, and the company experienced significant lost income during than those ferries’ dockings.

Furthermore, the company is being affected by the delay in the construction of a pipe to refuel LNG. In an effort to deal with the excessive refueling times, the company has been forced to run ferries on a higher speed, resulting in higher fuel consumption, and decrease the number of weekly departures until the pipe has been completed.

Due to its challenges, the company is expecting an EBITDA of about NOK 2 million for 2014, representing a shortfall from budget of roughly NOK 146 million. The deficit can be attributed primarily to non-recurring start-up costs on new routes/ferries and lower-than-expected on-board spending.

The weak financial performance is impacting the issuer’s cash flow and cash balance significantly, resulting in a potential covenant breach in the first quarter of 2015

Without any amendments of the current financing structure, the cash balance is expected to be below the minimum cash requirement of the issuer’s loan agreements.

Proposed amendments

The following changes to the bond agreement were approved:

• Extend the maturity date to Feb. 5, 2018 from Feb. 5, 2016;

• Amend the meaning of senior debt and permitted security;

• Obtain additional security from Fjord Skibsholding I A/S, owner of the MS Oslofjord), and Fjord Skibsholding II A/S, owner of the HSC Fjord Cat;

• Temporarily lift the minimum liquidity requirement of NOK 50 million in March 2015 to a reduced level of liquidity of NOK 25 million until June 2015, at which time the NOK 50 million liquidity would then be re-instated; and

• Increase the margin to 875 basis points from 750 bps from the interest payment date in February 2015 and onwards.

The company informed the trustee prior to the meeting that it had received binding commitments from its largest bondholders to support the proposal.

To approve the resolutions at the meeting, bondholders representing at least two-thirds of the bonds represented in person or by proxy needed to vote in favor of the resolution. To have a quorum, at least half of the voting bonds needed to be represented at the meeting.

Questions may be directed to financial advisers Pareto Securities AS Fixed Income Sales (47 22 87 87 70) or Norne Securities AS Fixed Income Sales (47 55 55 91 50).

The company is based in Egersund, Norway.

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