Viking Supply seeks to amend floaters due 2017; holder meeting set

By Susanna Moon

Chicago, July 12 – Viking Supply Ships A/S is asking bondholders to approve amendments to its senior floating-rate bonds due 2017 as part of its proposed restructuring.

A bondholder meeting has been set for July 26 in Oslo.

Viking has secured bank lender support for its proposal, which “marks an important step toward the completion of a long-term restructuring of VSS and the main outstanding issue is now to reach an agreement with the bondholders,” according to a company notice.

The restructuring terms would convert half of the issue into class B shares in the company’s parent company, Viking Supply Ships AB, at a subscription price of SEK 1.50 for a value of 36% of par.

The remainder would be amended, with the coupon cut to 6.7% – of which 3.7% is payable in cash and 3% in kind.

Financial covenants would be deleted except for the dividend restriction, which will be amended to be absolute and prevent any distribution to the parent.

Other key restructuring terms include the following:

• Extend the bank facilities until March 31, 2020;

• Contribution from banks of about $215 million, including deferral of maturities and amortization schedules;

• Deferred amortization structure under bank facilities, with fixed quarterly repayments in the amount of $750,000 from 2018;

• In addition to fixed amortization under the bank facilities payable from March 31, 2018, there will be a cash sweep mechanism, in which excess cash on hand will be distributed as repayment of the bank facilities in 2018;

• Financial covenants under bank facilities amended “to provide the company with ample room to operate under the present challenging market conditions”;

• Restructuring of the arrangements for the vessel Odin Viking to reflect a reduced payment of maximum $10,000 per day for a period until May 31, 2024;

• Removal of the put options for Odin Viking; and

• The company will receive at least $17.6 million of new capital by way of an equity issue in the parent, of which Kistefos will guarantee $13 million.

To pass, holders of at least two-thirds of the bonds represented at the meeting must vote for the proposed amendments. To form a quorum, at least half of the bonds must be represented.

The bonds were issued in 2012.

Recent news

Viking said on July 5 that it would not be able to survive as a going concern if holders of its 2012/2017 bonds refuse to change their position regarding the bond restructuring.

“Should a solution not be reached, the only realistic outcome is bankruptcy,” the company said in the release.

Viking Supply said it agreed on a restructuring framework with its bank creditors, but that agreement is subject to reaching an agreement with the bondholders.

“The discussions with bondholders, however, have been quite challenging,” the company said in the release.

Viking Supply said it had been in touch with a committee of three core bondholders and had on several occasions proposed a solution that involves a deferral of the maturity of the bonds, as demanded by the secured creditors, and part of the interest payments being made in-kind as a part of a global solution for the restructuring of the group’s balance sheet.

Since the recovery of the unsecured creditors in the event of a bankruptcy is likely to be extremely limited, the company said it believes this proposal, which does not involve any reduction of any part of the bondholders’ claim, to be a fair offer. However, Viking said the offer has been “flatly rejected” by the bondholders committee.

The company previously said that the only solution the bondholders are willing to discuss is one where the bonds are redeemed in cash, albeit at a somewhat discounted price.

The company said the amount of new equity raised, as demanded by the secured creditors, will allow for working capital and early repayment of secured loans in exchange for eased amortization over the next four years.

“VSS would therefore strongly encourage the bondholders to engage in a constructive dialogue on realistic premises to seek to find a solution which will allow a financial restructuring of VSS,” the previous release said.

“VSS is willing to explore various alternatives, including a conversion of bonds into shares in Viking Supply Ships AB...but is not in a position to offer redemption for cash.

“However, shares received can be freely sold by the recipients.”

Based in Gothenburg, Sweden, Viking is an offshore and icebreaking company in the Arctic and subarctic areas, as well as a provider of shipping services between the Baltic Sea and the continent.

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