Company Presentation

Company Presentation
Contemplating NOKm 250 - 275 Second Lien Bond Issue
16 May 2013
Disclaimer
This Document has been produced by Volstad Shipping AS (“Volstad” or the “Company”) solely for use at the presentations to be held in connection with the proposed private placement of bonds (the
“Bonds”) by Volstad Shipping AS and may not be reproduced or redistributed, in whole or in part, to any other person.
This material has been prepared exclusively for the benefit of and the internal use of the receiver in order to evaluate the feasibility of one or more potential transactions. The Company holds all rights
related to the contents of this material, and the receiver is not entitled to publish or otherwise disclose its contents to a third party without the prior written consent of the Company. This material may only
be used for the purpose of evaluating the potential of one or more transactions.
In preparing this material the Company may have obtained and relied upon, without independent verification, information available from publicly available sources and registers. Even if these sources are
deemed reliable, the Company cannot vouch for the accuracy and completeness of their contents. In any case, this material is incomplete if not regarded and read in conjunction with the oral briefings
and/or other documentation provided by the Company. It is emphasized that opinions expressed in this material reflect the Company’s judgement at this date, all of which are accordingly subject to
change. The Company holds no obligation to update this material.
Any transaction involves risk and forward-looking statements concerning future earnings, margins and returns are forecasts subject to risk, uncertainties and other factors, and the Company assume no
guarantee of any forward-looking statement concerning future earnings, margin, return or others referred to in this material. In general the Company accepts no liability whatsoever arising directly or
indirectly from the use of this material.
This Document contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements
concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words “believes”, "expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”,
“aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this Document, including assumptions, opinions and views of the Company or cited from
third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of
the Company or any of its subsidiary undertakings or any such legal person’s officers or employees provide any assurance that the assumptions underlying such forward-looking statements are free from
errors nor do any of them accept any responsibility for the future accuracy of the opinions expressed in this Document or the actual occurrence of the forecasted developments. The Company assumes no
obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to our actual results.
No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no
liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the Company or any of its parent or subsidiary undertakings or any such legal
person’s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this Document. This Document is confidential and is being communicated in the United Kingdom
to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (such persons
being referred to as “investment professionals"). This Document is only directed at qualified investors and investment professionals and other persons should not rely on or act upon this Document or any
of its contents.
In relation to the United States and U.S. persons, this Document is strictly confidential and is being furnished solely in reliance upon applicable exemptions from the registration requirements under the
U.S. Securities Act of 1933, as amended. The shares of the Company have not and will not be registered under the U.S. Securities Act or any state securities laws, and may not be offered or sold within
the United States, unless an exemption from the registration requirements of the U.S. Securities Act is available. Accordingly, any offer or sale of shares in the Company will only be offered or sold (i)
within the United States, only to Qualified Institutional Buyers (“QIBs”) in private placement transactions not involving a public offering and (ii) outside the United States in offshore transactions in
accordance with regulation S. Any purchaser of shares in the United States, will be required to make certain representations and acknowledgements, including, without limitation that the purchaser is a
QIB. Prospective purchasers are hereby notified that sellers of the new shares may be relying on the exemption from the provisions of sections of the U.S. Securities Act provided by rule 144a. None of the
Company’s shares have been or will be qualified for sale under the securities laws of any province or territory of Canada. The Company’s shares are not being offered and may not be offered or sold,
directly or indirectly, in Canada or to or for the account of any resident of Canada in contravention of the securities laws of any province or territory thereof.
AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS
PRESENTATION. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT; ACTUAL RESULTS MAY
VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION.
Investment in the Bonds may be subject to further risk factors. No investment in the Bonds should be made without a thorough analysis of such risk factors. Subject to the disclaimer above, the information
given in this Document reflects the situation as of 15 May 2013
2
Contents
1
Investment summary & transaction details
2
Company overview
3
Security specification
4
Market overview
5
Financial information & risk factors
6
Appendix
Bond loan: Main terms and conditions
Issuer
Volstad Shipping AS, reg. no 986 357 157
Loan amount
NOK 250 – 275 million
Coupon
3 months NIBOR + 6.0% p.a. quarterly coupons
Settlement date
Expected to be on or about 30 May 2013
Final maturity date
30 May 2018 (5 years from Settlement date)
Amortization
Bullet repayment
Purpose of the bond
Refinance of existing debt and general corporate purposes.
Status
The bonds shall be senior debt of the Issuer, secured by second priority pledge in the Vessels (and the
Guarantor if applicable), and rank at least pari passu with the claims of its other creditors, except for
obligations which are mandatorily preferred by law.
Security
• 2nd priority pledge in Volstad Supplier, Volstad Princess and Seabed Prince (the “Vessels”)
• 1st priority pledge in the debt service reserve account
• 2nd priority assignment in insurances.
Call options
• Year 0 – 3: Non-call
• Year 3 – 4: @ 104%
• Year 4 – 5: @ 102%
Financial covenants
•
•
•
•
•
Senior Facilities Cap
Bank facilities ranking ahead of the Bond loan shall be amortized by a minimum amount for each year as
follows: 2013: NOKm 23; 2014-17: NOKm 40; 2018: NOKm 17.
Dividend restriction
Maximum 50% of the consolidated net profit for the Issuer
Listing
An application will be made for Oslo ABM
Manager
SpareBank 1 Markets
Market adjusted equity ratio: 25% initially, with a step-up to 30% after 2014
Working capital to be positive at all times
Cash covenant: minimum NOK 25 million
Asset cover ratio: minimum 120%
Vessel contract coverage minimum 6 months (total for pledged vessels)
4
Overview of bond structure
Volstad Shipping AS
New bond issue
100%
Pledged vessels*
Volstad Princess
Seabed Prince
Volstad Supplier
Other
vessels*
Volstad AS
Volstad Viking
Newbuild TBN
100%
Volstad
Crewing AS
Management
services
• Crewing
Volstad Surveyor
Main bond features:
• Issuer: Volstad Shipping AS
• 2nd priority mortgage over two PSVs and one
subsea vessel
•
1st
priority pledge in the debt service reserve
account
Fishing
• Fishing licenses
and fishing
trawler “F/T
Volstad”
• Newbuild with
delivery in June
2013 (on time
and budget)
• 2nd priority assignment in insurances
* All vessels are directly owned 100% by Volstad Shipping AS
5
Investment summary
•
•
Diversified,
modern fleet
Provider of ship- and management services within offshore (PSV and IMR/Subsea) and fishery
Total fleet consists of six vessels (three PSVs, two subsea vessels and one factory trawler)
–
•
All vessels are relatively new with modern design
–
Good contract
coverage and cash
flow generation
Average fleet age of 3.8 years
•
Proven operational and technical performance with commercial utilization rate of 99%
•
All five offshore vessels are on charter contracts and provide steady cash flow
– EBITDA backlog above NOKm 400 with average of 2.0 years remaining contract life excluding options
•
•
2012 full year revenues of NOKm 413 and EBITDA of NOKm 172 (42% EBITDA margin)
Moderate gearing:
– Group gross LTV of 59% at year end 2012, up to 63% after refinancing**
– Group net LTV of 50% at year end 2012, will remain unchanged after refinancing
•
Asset backed
bonds within LTV
69%
Positive market
outlook
Market value* of NOK 2.5 bn.
The planned refinancing consists of a new 1st priority bank facility and a new 2nd priority bond loan,
in total up to NOKm 625
–
–
–
–
•
•
•
The loans will be secured with Seabed Prince, Volstad Supplier and Volstad Princess
The current market value of the three vessels is NOKm 1,109
Gross LTV up to 69% (including existing bank financing of NOKm 145), reduced to 46% at bond maturity
Bank loans ranking ahead of the Bond loan must be amortised by a minimum of NOKm 40 p.a. (the
Senior Facilities Cap) thus providing deleverage on pledged assets
Increasing offshore capex and drilling fleet drive continued growth in global offshore activity
The subsea sector is currently seeing all-time high backlogs and tendering activity
Increasing number and complexity of subsea projects drive demand for offshore construction and
support vessels
* Market values based on average of valuations from three independent well known brokers (one broker for fishing assets) as of 31/12/2012
** Note that when using the term «up to» throughout this presentation we refer to a bond loan of NOKm 275 (i.e. in the upper range of the interval)
6
Sources and uses of funds
Comments
•
Sources of funds (NOKm)
Volstad Shipping will commit to a new NOKm 350 1st lien
loan and guarantee facility (consisting of a NOKm 113.75
guarantee facility and a USDm 41.50 loan facility) and a
new 2nd lien bond loan of NOKm 250 - 275
•
Total sources of funds approximately NOKm 625
•
As part of the contemplated refinancing Volstad Shipping
will repay bank loans of NOKm 390
•
Net proceeds from refinancing are estimated to NOKm
229
•
The net proceeds will be used to partly finance a new
state-of-the-art construction vessel
•
Volstad Shipping has worked on a new design together
with Skipsteknisk
•
The feedback from the market has been positive, and
Volstad Shipping is currently in advanced discussions
with potential 1st class charterers
•
The vessel is planned built at a well-known yard in Turkey
•
Volstad Shipping expects to decide the timing of the
possible newbuild during Q2 2013
275
625
350
New first lien
bank loan
New second lien
bond loan
Total sources
Uses of funds (NOKm)
229
6
625
396
390
Repayment of
bank loans
Transaction costs
Proceeds
Total uses
7
Summary of risk factors
The Company is exposed to numerous risk factors. A brief summary is outlined below. Please see section 5 Financial
information & risk factors of this presentation for a further presentation of some of the relevant risks factors.
•
Counterparty risk and limited fleet/contracts: Although the Group has reputable customers, the Group’s shipping services are
subject to the risks associated with having a limited number of customers for its services. Lack of payments from
costumers/future contracting parties may significantly and adversely impair the Group’s liquidity. The Group's fleet presently
consists of only a limited number of vessels, thus rendering it substantially exposed to operational downtime under any charter
party or lack of future employment.
•
Time charter parties close to expiry: Two of the Group's four time charter parties expire during 2013, and one expires in Q2
2014. The fourth and last time charter party expires in Q2 2017. There may be uncertainty as to whether or not the Group will be
able to secure new employment of the Vessels without long-lasting off-hire periods between the charters. The level of future
charter hire also remains uncertain. A mitigating factor is the Group’s Bareboat contract with Swire expiring in May 2017.
•
Exposure to technical risk and off-hire: The Vessels are mainly on timecharters. As owner under timecharter arrangements,
the Company carries the risk of operational and technical problems which may result in off-hire. While the operational trackrecords of the Vessels to date are satisfactory, any off-hire could adversely affect the Company's financial condition, however the
Company is insured against off-hire exposure (see page 19 for further details on insurance).
•
Operation risks and liabilities: Ship owners and operators, such as the Company, are exposed to operating costs (such as
bunker fuel prices (fishing vessel only), insurance premiums and crew costs) and operational requirements (such as compliance
with environmental, safety, national and classification requirements), the effect of which could adversely affect the Group’s
business, financial condition and operating results. The Company could be exposed to substantial liabilities, i.e. pollution and
environmental liabilities, not coverable under the insurance. The Company's operations may also be suspended because of
machinery breakdowns, abnormal weather conditions etc., all of which could adversely affect the Company's financial condition.
•
New-building risk: The factory trawler under construction is currently expected to be delivered on time and budget, however,
there is always an inherent risk related to delays and budget overruns related to new-buildings.
8
Contents
1
Investment summary & transaction details
2
Company overview
3
Security specification
4
Market overview
5
Financial information & risk factors
6
Appendix
Volstad Shipping in brief
•
Volstad Shipping was founded in 1953, operating solely within fishery
•
The first offshore vessel, Geco Tau, was acquired in 1982
•
In 1998 the Company acquired the seismic research vessel Geco
Bluefin
•
Geco Tau and Geco Bluefin became part of Volstad Maritime in 2003
following the split of the company
•
In 2007 - 2008 Volstad Shipping took delivery of three PSVs from STX
(now renamed Vard) in Norway
•
In 2009 - 2010 the company took delivery of two IRM/subsea vessels,
one from Båtbygg AS in Norway and one from Freire Shipyard in Spain
•
Volstad Shipping is today a fully integrated provider of ship- and
management services within offshore (PSV and IMR/Subsea) and
fishery
•
Located in Ålesund, Norway with world-wide operations
•
Total fleet consists of six vessels :
–
–
–
3 PSVs
2 IMR/subsea vessels
1 factory trawler with three licenses for cod, haddock and saithe
•
All five offshore vessels are currently on charter contracts
•
The company has one vessel under construction, a factory trawler with
expected delivery in Q2 2013
•
2012 full year revenues of NOKm 413, EBITDA of NOKm 172, and
EBITDA margin of 42%
•
For more information, please see www.volstad.no
10
Background: 60 years of experience
Acquisition of
first fishing
vessel
1953
1982
Acquisition of
seismic research
vessel Geco Tau
Acquisition of seismic
research vessel Geco
Bluefin
1998
2003
Family company
split into Volstad
Maritime and
Volstad Shipping
Acquisition
of F/T
Volstad
2005
Delivery of PSV
Volstad Princess
2007
Delivery of PSVs
Volstad Viking and
Volstad Supplier
2008
Delivery of
IMR/Subsea vessel
Volstad Surveyor
2009
Delivery of
IMR/Subsea
vessel Seabed
Prince
2010
2011
Fully integrated
provider of ship- and
management
services
2013
Reaches 100% ownership in all
vessels. Executes strategy to
offer management services
11
Contract overview – offshore vessels
Bond
security
package
Vessel name
Built
year
Type
Counterparty
Contract
Expiry
Type
2013
Volstad Princess
2008
PSV
Statoil
Oct-13
Time charter
4x1 month
options
Seabed Prince
2009
IMR/
Subsea
Swire Seabed
May-17
Bareboat
5x1 annual
options
Volstad Supplier
2007
PSV
BP
Jan-14
Time charter
Volstad Viking
2007
PSV
ConocoPhillips
Jun-14
Time charter
Volstad Surveyor
2010
IMR/
Subsea
DeepOcean
Nov-16
Time charter
Options
2014
2015
2016
2017
EBI
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
3x1 annual
options
Contract
Option
Spot/no contract
•
Total firm revenue backlog in excess of NOKm 600 before options, corresponding EBITDA backlog above NOKm 400
•
Average remaining contract duration of 2.0 years for all vessels, 1.7 years for pledged vessels
12
PSV fleet
• Three high-spec vessels from 2007 and 2008
Volstad Viking
• Built at STX Brattvåg in 2007
• Market value: NOKm 355
• Charterer: ConocoPhillips
• High-end large PSVs:
• Skipsteknisk design ST-216L CD
• Deck area 1,060 m2
• 5,100 DWT
• Solid clients: ConocoPhilips, BP and Statoil
• The PSV segment generated 35% of total EBITDA for
2012
• Further vessel details included in appendix
Volstad Supplier
• Built at STX Brattvåg in 2007
• Market value NOKm 355
• Charterer: BP
Share of total market value and EBITDA (2012)
Fishery
21%
Subsea
34%
Market value
PSV
45%
Fishery
17%
PSV
35%
Volstad Princess
• Built at STX Brattvåg in 2008
• Market value NOKm 359
• Charterer: Statoil
Subsea
48%
EBITDA
13
Subsea fleet
Volstad Surveyor
• Built at Freire Shipyard, Spain in 2010
• Market value NOKm 395
• Charterer: DeepOcean
• Two high-spec inspection, maintenance and repair
(IMR) vessels from 2009 and 2010:
• Skipsteknisk design ST-253
• 70T offshore crane
• 2,200 DWT
• Long term charter profile, expiry in Nov. 2016 and May
2017 with options to extend
• The Subsea segment generated 48% of total EBITDA
for 2012
• Further vessel details included in appendix
Seabed Prince
• Built at Båtbygg, Norway in 2009
• Market value NOKm 395
• Charterer: Swire
Share of total market value and EBITDA (2012)
Fishery
21%
Subsea
34%
Market value
Fishery
17%
PSV
45%
PSV
35%
Subsea
48%
EBITDA
14
Seabed Prince – further details on charterer
•
In February 2012, the Bergen headquartered Swire
Seabed AS was acquired into Swire Pacific Offshore’s
network of over 20 offices on five continents
•
Swire Pacific Offshore is a subsidiary of Swire Pacific
which is listed in Hong Kong with a market cap of about
USD 19.0 bn.
•
Swire Pacific Offshore has one of the largest and most
modern offshore energy support fleets in the world
•
The company's fleet of more than 75 vessels includes
anchor handling tug supply vessels, platform supply
vessels, ice-breaking supply vessels, anchor handling
tugs and seismic survey vessels
•
Swire Seabed provides high quality services for
inspection, maintenance and repair, and survey as well as
remote operated vehicle services
•
Swire Seabed has operated Seabed Prince on a longterm bareboat charter since May 2012
•
For more information, please see www.swire.com and
www.swireseabed.com
* Based on USD/NOK rate of 5.80
Swire Pacific key financials:
• Market cap: USD 19.0 bn.
• Revenue 2012: USD 5.7 bn.
• EBITDA 2012: USD 1.7bn.
Key contract terms:
• Bare boat rate: USD 23,000 per day
• Contract expiry May 2017
• Remaining contract life 4 years (1,492 days)
• EBITDA backlog USDm 34 (NOKm 199)*
• Purchase option at end of charter at USDm 70 (NOKm 406)*
15
Fishery fleet
• F/T Volstad is owned and operated by Volstad AS, a
100% owned subsidiary of Volstad Shipping AS
• New vessel under construction to replace
F/T Volstad, delivery Q2 2013
F/T Volstad
• Design: Skipsteknisk
• Built at STX Søviknes in 1998
• Market value including license NOKm
490
• The Company has three licenses for cod, haddock
and saithe, these will be transferred to the new vessel
upon delivery
• The fishery segment accounted for 17% of total
EBITDA in 2012
• Further vessel details included on page 17 and in the
appendix
Share of total market value and EBITDA (2012)
Fishery
17%
Fishery
21%
PSV
45%
Subsea
34%
Market value*
”Newbuild” (to be named)
• Design: Skipsteknisk
• Under construction at Tersan Shipyard
in Turkey
• Delivery in Q2 2013
• Market value including license NOKm
615
PSV
35%
Subsea
48%
EBITDA
* Source market value fishing vessel: Atlantic Marine AS, mid-range market value including value of license as of March 2013
16
Newbuild project progressing according to plan
• New factory trawler to replace F/T Volstad
from 1998
Newbuild project anno 2013
• Under construction at Tersan Shipyard in
Turkey and on time for delivery in late May
2013
• The vessel is outfitted with a fully integrated
onboard grading, processing and freezing
system
• Total market value of approximately NOKm
615 (including value of licenses NOKm 365)
• Fully financed with bank debt totaling NOKm
275 (LTV 45 % incl. licenses)
• F/T Volstad to be sold at delivery of the
newbuild in May 2013 at a price of NOKm
115
• In connection with the transaction Volstad AS
expects to book a gain of NOKm 60 – 70
compared with the book value of the vessel
F/T Volstad built 1998
17
Company structure
Volstad Shipping AS
100%
Volstad AS
100%
Volstad Crewing AS
•
Volstad Shipping AS is owned 100% by Eivind Volstad (CEO and founder of the company)
•
Volstad Shipping AS is the legal owner of the three PSVs and the two IMR/subsea vessels
•
The factory trawler and the fishing licenses are owned by Volstad AS, a 100% owned subsidiary of Volstad Shipping AS
•
All crewing personnel employed with Volstad Crewing AS, a 100% owned subsidiary
18
Operation, maintenance and insurance
•
The vessels are managed technically, commercially and operationally by Volstad Shipping AS
•
The vessels are kept in good and safe condition and maintained and repaired in consistence with prudent ownership and good
industry standards
•
Running maintenance is carried out on board by special crew members (such as painting and minor repairs) and the costs
are covered on a running basis
•
Classifications/periodic maintenance is due every five years and the budgeted costs are set aside on a monthly basis and
provision for such class cost/periodic maintenance expenses are booked in the profit & loss statements (according to
NGAAP standards)
•
The vessels and all relevant equipment are adequately insured with first class insurers in accordance with industry standards.
Such insurance premiums are payable annually in advance and covers inter alia (PSV and Subsea vessels respectively):
•
Hull and machinery NOKm 340 to 400 per vessel
•
Hull interest NOKm 85 to 100 per vessel
•
Freight interest NOKm 85 to 100 per vessel
•
War risk NOKm 510 to 600 per vessel
•
Loss of hire NOKm 15 to 21 in total per vessel and reflecting current charter levels
•
Protection & indemnity (P&I):

Oil pollution liability limit: USD 1 billion

Crew/passenger liability limit: USD 3 billion

CGL limit: USD 10 million to USDm 50
19
Highly experienced senior management team
Eivind Volstad
CEO, board member and owner
Ole Andreas Holm
Operations Manager
Education
• The Norwegian Shipping Academy, Oslo (1985)
• MRDH (Economy and Administration), Molde
(1983)
Professional experience
• 1987-d.d.: CEO Volstad Shipping
• 1983-1987: Storebrand Marine, financing,
underwriting, claims, adjustments and
international reinsurance
Education
• BI Master of management (2009, ongoing)
• University College, Master Mariner (1992)
Professional experience
• 2012-d.d.: Operations Manager
•
Volstad Shipping
• 2011-2012: University College, General
Manager for ”Maritime Operations”
• 2000-2011: Offshore, Rig – MODU, OIM
• 1995-1999: Offshore, Construction and ROV,
Captain
• 1986-1994: Fishery Mate/Captain
Kurt Inge Sandnes
CFO
Jan Rogne
Technical Manager
Education
• BI Norwegian Business School (Economy and
administration, Oslo 1992), Aquaculture
• (Frøya vocational school, 1986) and Fishing
Profession (Aukra vocational school, 1982)
Professional experience
• 2012-d.d.: CFO Volstad Shipping
• 2006-2012: General Manager, Offshore &
Shipping, SpareBank 1 SMN
• 1998-2006: CFO Olympic Shipping AS,
Offshore and fishery
• 1992-1998: Corporate Adviser Nordea
• 1986-1990: Operation Manager fish farming
Education
• Engineer (1985)
Professional experience
• 1997-d.d.: Superintendent and Technical
Manager at Volstad Shipping
• 1996-1997: Sales Manager for fishing gears to
the South African market,
• 1992-1996: Chief Engineer on the company’s
vessels and superintendent on new buildings,
American Seafood,
• 1984-1996: 13 years sea experience, 9 years
as engineer/chief engineer on PSV and ATHV
vessels, World Wide
20
Strategy and focus sectors
Core values
Business
model
High-end
offshore
vessels
Long term
charters with
first class
clients
Diversified
business
model
• Volstad Shipping’s slogan is “expect more” with high attention to personnel and the latest technology,
focusing on clients’ needs in a responsible and professional manner, while maintaining a first class
environmental track record
• Volstad Shipping aims to be a niche provider of specialized, high-end offshore tonnage to the oil and gas
industry, primarily in the North Sea, Norwegian Sea and Barents Sea
• The company is a fully integrated provider of vessels and management services
• All vessels ordered by Volstad Shipping are in the high-end segment, utilizing the latest technology
available
• All offshore vessels have the Clean Design (CD) notification, and are purpose built for operations under
severe weather conditions and with high maneuverability and station keeping capabilities
• The average fleet age for the offshore vessels is 4.6 years
• The contract strategy is to have all vessels on long term contracts with first class charterers
• Volstad Shipping currently have all vessels on fixed contracts with clients such as Statoil, ConocoPhillips,
BP, DeepOcean and Swire
• While maintaining its position as a niche provider of offshore vessels, Volstad Shipping also holds an
attractive position within fishery, providing stable earnings from a market that is uncorrelated with the oil
and gas industry
21
Contents
1
Investment summary & transaction details
2
Company overview
3
Security specification
4
Market overview
5
Financial information & risk factors
6
Appendix
Security package, comfortable LTV level
Vessel values vs. interest bearing debt (NOKm)
145
395
350
69% LTV
(gross)
1,109
359
275
355
Supplier market Princess market
value
value
339
Prince market
value
Market value
pledged vessels
Existing debt
Princess*
New bank loan** New bond loan
(NOKm 250 275)
Equity buffer
(gross)
Contemplated
bond issue
* NOKm 9.5m of the NOKm 145 facility will be repaid 29/05/2013 in line with the repayment schedule
** The new NOKm 350 DVB/SMN bank facility will consist of a NOKm 113.75 tranche and a USDm 41.50 tranche
23
Overall pledge structure
Pledged
vessels
Volstad Princess
Seabed Prince
Market value NOKm 359
Market value NOKm 395
Existing
bank
1st priority DVB/guarantee facility NOKm 145*
New
bank
1st priority DVB/SMN facility NOKm 350 (new)**
New
bond
•
Volstad Supplier
Market value NOKm 355
2nd priority bond loan NOKm 250 – 275 (new)
Market
value
NOKm
1,109
Bank
debt
NOKm
495
Bond
loan
NOKm
250-275
The security package consists of Volstad Supplier, Volstad Princess and Seabed Prince
–
–
Total market value of NOKm 1,109
Average age pledged vessels is 4.7 years
•
Bank loans of NOKm 495 will rank parri passu ahead of the proposed bond loan
•
The proposed bond will enjoy a 2nd priority pledge in the vessels with a LTV of 69%
•
Value adjusted equity buffer for the pledged vessels after refinancing will be NOKm 339
* NOKm 9.5m of the NOKm 145 facility will be repaid 29/05/2013 in line with the repayment schedule
** The new NOKm 350 DVB/SMN bank facility will consist of a NOKm 113.75 tranche and a USDm 41.50 tranche
24
De-leveraging of pledged vessels
Debt and LTV 2013E – 2018E
770
689
700
600
80%
741
275
585
275
533
275
NOK mill.
500
•
Total debt related to the pledged
vessels is up to NOKm 770
including the bond loan
•
Underlying vessel values of
NOKm 1,109 result in gross LTV
of up to 69%
•
Annual bank loan amortizations
of NOKm 52 reduce bank debt in
the pledged structure by NOKm
260 before bond loan maturity
•
Gross LTV at bond loan maturity
is up to 46% assuming constant
vessel values
70%
637
60%
510
50%
275
275
400
275
275
300
40%
LTV %
800
30%
495
200
466
414
362
20%
310
100
258
235
2017E
Balance at
maturity
-
10%
0%
Opening
balance
2013E
2014E
Bank debt
2015E
Bond loan
2016E
LTV (gross)
25
Volstad Supplier
Key data
Status
On T/C to BP
Owner
Volstad Shipping AS 100%
Median broker value
NOKm 355
Technical data
Built
Design
2007
Skipsteknisk PSV ST-216 L CD
Dimensions
93.4m x 19.2m
DWT
5,100T
1,060m2
Deck area
Crane
1x4t / 10m, 1x1.5t / 8m
Other
Clean Design
Contract details
Fixed period
Option period
Annual EBITDA*
* 2013 budget excluding provisions for docking/class costs
To January 2014
n/a
NOKm 27
26
Volstad Princess
Key data
Status
On T/C to Statoil
Owner
Volstad Shipping AS 100%
Median broker value
NOKm 359
Technical data
Built
Design
2008
Skipsteknisk PSV ST-216 L CD
Dimensions
93.4m x 19.2m
DWT
5,100T
1,060m2
Deck area
Crane
1x4t / 10m, 1x1.5t / 8m
Other
Clean Design
Contract details
Fixed period
Option period
Annual EBITDA*
* 2013 budget excluding provisions for docking/class costs
To October 2013
4 x 1 month
NOKm 29
27
Seabed Prince
Key data
Status
On BB charter to Swire Seabed
Owner
Volstad Shipping AS 100%
Median broker value
NOKm 395
Technical data
Built
Design
2009
Skipsteknisk ST-253
Dimensions
85.3m x 18m
DWT
~2,200T
650m2
Deck area aft of
hangar
Crane
70T offshore crane
Other
Helideck, 1 tuggerwinch 10t,
2 capstans each 10t,
Work ROV
Contract details
Fixed period
Option period
Annual EBITDA*
* 2013 budget excluding provisions for docking/class costs
To May 2017
5 x 1 years
NOKm 47
28
Charter contracts
Contract terms
Volstad Supplier
Volstad Princess
Seabed Prince
Type of charter
Time charter
Time charter
Bareboat charter
Charter party and vessel
Volstad Shipping AS
Volstad Shipping AS
Volstad Shipping AS
Vessel
Volstad Supplier
Volstad Princess
Seabed Prince
Flag
NOR
NOR
NIS
Charterer
BP Norge AS
Statoil ASA
Swire Seabed AS
Geographic operational
Norwegian Continental Shelf/Norwegian
Waters
World-wide. Change of geographical
region requires prior written notice to
owner.
World-wide. Unrestricted but always within
conditions of charter clause 6 (in which the
charterer undertakes i.a. to employ the
vessel in conformity with the contracts of
insurance, and i.a. not to employ the
vessel in any trade or business which is
forbidden by the law of any country the
vessel may sail).
Date of delivery
17 January 2013
On or about 1 June 2008
May 2012
Period of hire
1 year firm
4 months firm from 1 June 2013
5 years firm
owner
region
Current firm period expires 17 January
2014
Extensions options
None
4 x 1 month options
5 x 1 year option – strictly subject to 6
months prior notice
Charter hire (start)
Firm charter period: NOK 159,000/day
NOK 168,000/day
USD 23,000 per day
Both excluding fuel and NOx fees/dues
and UREA
Excluding fuel and miscellaneous costs
(port charges/harbour expenses, pilotage,
loading/discharging etc.)
(applicable for all firm and optional years)
29
Charter contracts
Continued
Contract terms
Volstad Supplier
Volstad Princess
Seabed Prince
Charter hire (current)
NOK 157,000/day. Excluding fuel and any
NOx fees/dues and UREA
NOK 166,582,06/day
USD 23,000/day
Escalation
N/A
N/A
N/A
Assignment, sub-charter
a) The owner shall not assign the benefit of
any hire payment or invoice of additional
costs and expenses without the charterer's
written consent cf. clause 8.6.
a) The charterer may freely assign the
charter to affiliate companies or third
parties, provided that the assignee has
sufficient financial strength to fulfil its
obligations under the charter
The charterer shall not assign nor subcharter the Vessel on a Bareboat basis,
without prior written consent of the Owner
(which shall not be unreasonably withheld)
and sale
b) The charter may sublet the vessel
without prejudice to the parties rights and
obligations under the charter, and shall be
entitled to all revenues received
thereunder.
Liability/insurance
b) The owner’s rights and obligations are
not transferable either by sale, change of
ownership or flag or assignment, unless
prior written consent by the charterer has
been obtained.
Standard knock for knock allocation of
responsibility. There is no cap on the
liability. Neither party is liable for
consequential damages. The owner is
liable for damages from any pollution or
contamination emanating from the vessel.
Standard knock for knock allocation of
responsibility. There is no cap on the
liability. Neither party is liable for
consequential damages. The owner is
liable for damages from any pollution or
contamination emanating from the vessel.
The owner is responsible for insurance.
The charterer is liable for damage to any
third party resulting from i.a. blow-out of
any well or reservoir, reservoir seepage or
pollution from oil- or gas field operated by
the charterer.
The owner shall not sell the vessel during
currency of the charter, without prior written
consent of the charterer, which shall not be
unreasonably withheld, and subject to
buyer accepting an assignment of the
charter
The charterer is responsible for insurance
at its own expense against hull and
machinery, war and Protection and
Indemnity risks.
The owner is responsible for insurance.
Non-competition
N/A
N/A
N/A
30
Charter contracts
Continued
Contract terms
Volstad Supplier
Volstad Princess
Seabed Prince
Purchase option
N/A
N/A
The charterer has the right to purchase the
vessel at the end of year five of the charter
(2017), at a price of USD 70,000,000.
Exercise of the option requires a written
notice from the charterer at least 12
months prior to the end of year five.
Dispute resolution/
Norwegian law, dispute resolution in
accordance with the Norwegian Arbitration
Act nr. 25/2004
Norwegian law, with Stavanger District
Court as legal venue
English law, arbitration in Oslo, Norway
a) The charterer has the right to terminate
forthwith in the event of neglect or default
by the owner.
a) Termination: If the vessel is sold without
charterers prior written consent, or if the
owner otherwise is in substantial breach of
its obligations, the charterer has right to
terminate the charter.
a) If the owner breaches its obligations
under the charter, by act or omission, to
such extent that the charterer is deprived of
use of the vessel for a period of 14 running
days after written notice thereof, the
charterer is entitled to terminate with
immediate effect by written notice to owner.
governing law
Termination clause
b) The charterer has the right to terminate
charter at any time by giving no less than
30 days written notice to the owner.
However, the charterer is not entitled to
exercise such right to termination for the
sole reason that a similar vessel can be
chartered at a substantially lower hire than
the daily hire for Volstad Supplier.
b) Cancellation: The charter may at any
time cancel the charter upon written notice.
In such event, the charter will pay the
owner charter hire up to the expiry of the
charter period in which the notice was
given.
b) Either party is entitled to terminate with
immediate effect by written notice in the
event of i.a. winding up, dissolution,
bankruptcy or liquidation.
c) The charter shall be deemed terminated
in the event of total loss of the vessel.
Mortgage
N/A
N/A
The owner shall not effect any (existing)
mortgages, and shall not agree to any
amendments of the (existing) mortgages
without the prior consent of the Charterers,
which shall not be unreasonably withheld.
31
Charter contracts
Continued
Contract terms
Volstad Supplier
Volstad Princess
Seabed Prince
Miscellaneous
Off-hire:
Off-hire:
Quiet Enjoyment:
Total loss of time more than three hours in
any one calendar month.
In periods of off-hire (widely defined so any
event causing loss of time not due to the
charterer will constitute off-hire), all the
charterer's obligations and indemnities
The charterer has right to terminate the
under the charter cease, until service can
charter in the event of off-hire for a
continuous period of 30 days, excluding dry be reassumed as before the loss of time
commenced.
docking, or a total of 30 days for any 12
month period. The charterer also has
termination right if the off-hire event is
considered to be of a sufficiently serious
nature to jeopardise the personnel on the
offshore installation.
Provided that the charterer pays the hire in
accordance with the charter, the owner and
any persons claiming by, through or under
the owner shall not interfere with the
peaceful and quiet use and enjoyment of
the vessel by the charterer.
32
Contents
1
Investment summary & transaction details
2
Company overview
3
Security specification
4
Market overview
5
Financial information & risk factors
6
Appendix
Increasing offshore capex and drilling fleet
drive continued growth in global offshore activity
Global offshore capex USD bn.
• The graph above shows Rystad Energy’s E&P offshore
capex estimate going forward, which represents a 9%
increase from 2011 to 2012 and then a continued gradual
increase upward
• Consensus global offshore spending growth is projected at
around 10% annually from 2013 to 2016
Source: ODS Petrodata, Rystad, SB1 Markets
Global active offshore drilling fleet
• Growth in the global drilling fleet is an important driver for
the offshore support vessel market
• The total fleet of offshore drilling units is currently just
below 800 units and expected to rise to 917 within 2015,
based on the current order book
34
NCS outlook remains robust on the back of
recent discoveries
NCS capex NOK bn.
• NCS offshore capex was estimated at NOK 175 bn. in 2012
and is expected to increase to NOK 229 bn. in 2017
corresponding to an average annual growth of 5.6%
NCS rig fleet
• The NCS is largely isolated from the international
supply/demand balance of rigs due to the strict
requirements needed for rigs to operate in the market and
the supply/demand balance that matters is for the rigs that
are purpose-built for Norway
• The number of NCS rigs is expected to increase from 47 in
2012 to 65 in 2015 with a corresponding requirement for
vessel support and services
Source: Norwegian Petroleum Directorate, ODS Petrodata, SB1 Markets
35
Global offshore construction industry backlog
at all time high
Offshore construction backlog* USD bn.
• The subsea sector is currently seeing all-time high backlogs
and tendering activity
• With the typical lag-time of large EPC-projects, this will
result in new all-time high activity levels in 2013-2014 and
likely beyond, taking into account current market outlook
Offshore construction revenue and book-to-bill USD bn.
• Offshore construction book-to-bill ratio (order book divided
by annual revenues) is a leading indicator for offshore
vessel activity levels
• Project sanctioning gained momentum in 2011 and 2012
and backlogs started to increase with the book-to-bill ratio
currently at 1.6x (above 1.0x indicates future growth as
order intake exceeds turnover)
Source: Company reports, SB1 Markets
* Combined subsea backlog for the three leading EPC-players (Subsea 7, Technip and Saipem)
36
Increasing subsea activity drives demand for
offshore construction and support vessels
Global subsea tree awards
Global subsea spend USD mill.
• Subsea tree awards and estimated subsea tree installations
are key indicators for offshore vessel activity
• The outlook for the subsea EPC-sector naturally bodes
well for continued strong CSV-demand
• The number of tree installations is expected to increase
significantly over the next 3-5 years
• Amongst the leading subsea EPC-players, both SUBC and
TEC have recently commented that they expect capexlevels to remain high for the foreseeable future, as both
companies will pursue additional vessel-investments
• The key markets are North Sea, Brazil and West Africa with
US GoM and Australia as runners up
• Deepwater activities require more equipment in general.
This, plus the longer distances, calls for larger PSVs in
order to transport more equipment per cargo-run
Source: Quest, Rystad Energy, Ocean Installer, SB1 Markets
37
Global shift towards larger high-end supply
vessels
Global PSV fleet by DWT
30%
High-end PSV fleet utilization
28%
13%
28%
• More than 50% of the global PSV fleet is in excess of 3,000
DWT and usually characterized as large and modern PSVs
(high-end)
• The high-end fleet currently consists of about 570 PSVs
• Through 2015 further 250 high-end PSVs are scheduled for
delivery, implying a high-end fleet growth of approximately
44%
• The strong growth in the high-end fleet is driven by drilling
and field development activity in increasing water depths
with corresponding increasing distances to shore
Source: ODS Petrodata, SB1 Markets
• Utilization levels are in general higher for the high-end
PSV segment
• This reflects strong demand in the regions where such
vessels operate – predominantly the North Sea and Brazil
– but also the fact that operators generally prefer modern
tonnage if available
• In 2012, only 59% of planned PSV deliveries were
delivered implying about 110 vessels for delivery in 2013 if
the same ratio is applied to 2013
38
Fishery: price reductions in part offset by
increased volumes
Price development 2008 – 2013 (average quarterly prices) Value and volume of total catch 2009 - 2012
• Reduction in the price of cod due to high quotas and the
economic situation in Europe – prices are expected to
gradually increase but remain at relatively low levels
• Cod, haddock and saithe constituted about 1/3 of the total
volume and 45% of the total value of fish caught by
Norwegian fisheries in 2012
• The price of haddock is expected to increase from fall 2013
as quotas are reduced
• A significant increase in volumes over the past four years
has offset the decline in price per kilo such that the total
market for cod, haddock and saithe is NOK 1.5 bn. larger
than it was in 2009
• The price of saithe is negatively affected by a reduction in
the price of cod, the price is expected to have bottomed out
and development going forward is expected to follow the
price of other fish such as cod
Source: Sunnmøre og Romsdal Fiskesalslag SA (SUROFI), Norwegian Directorate of Fisheries, SB1 Markets
* 2012 data as of January 2013 – fish in stock will increase value of total catch
39
Contents
1
Investment summary & transaction details
2
Company overview
3
Security specification
4
Market overview
5
Financial information & risk factors
6
Appendix
Consolidated gearing Volstad Shipping AS
Valuation (NOKm) – post refinancing
615
63%
LTV
(gross)
1,279
395
355
50%
LTV
(net)
2,474
275
314
395
1,234
1,109
359
355
Supplier
market
value
Princess
market
value
Prince
market
value
Viking
market
value
Surveyor
market
value
"Newbuild"
market
value incl.
licence
Market
value
vessels
Bank loans New bond Forecast
Equity
(after re- loan (NOKm cash balance buffer (net)
financing)* 250 - 275) (after refinancing)*
•
Total market value of assets NOKm 2,474
•
Total gearing represents gross LTV of up to 63% and net LTV of up to 50% after re-financing
* Estimated cash and debt balances as of 30/04/2013 used as basis for estimation of post re-financing balance
41
Debt overview (post refinancing)
Comments
Total long term debt of NOKm 1,554 after refinancing
•
•
•
•
500
The average weighted duration of all debt after the
refinancing is 5.1 years
400
Bank loans of NOKm 344 mature in 2015
•
•
•
600
Bank debt NOKm 1,279
Bond issue up to NOKm 275
2nd
NOKm 120
priority pledge in Volstad Viking
NOKm 224 1st priority pledge in Volstad Surveyor
Volstad Shipping expects to refinance both loans falling
due in 2015 with banks, as the vessels in question will
have comfortable LTV levels:
•
•
NOK mill.
•
Debt maturity profile (NOKm)
275
300
344
200
100
-
67
2013E
(after bond
issue)
50% Volstad Viking
57% Volstad Surveyor
108
2014E
Amortizations
108
108
108
2015E
2016E
2017E
Maturity bank
41
2018E
(to bond
maturity)
Maturity bond
Balance
Annual
30 Apr. 2013 amortizations
NOKm
NOKm
Security
350
33
1st pri pledge in Volstad Supplier, Volstad Princess & Seabed Prince
Lender
New Bank Loan
Maturity
Apr-18
Margin
LIBOR + 3.25%
New Bond Loan
Apr-18
NIBOR + 6.0%
275
0
DVB/Eksportfinans
Dec-20
4.45% (fixed) + 1.35%
145
19
1st pri pledge in Volstad Princess
SMN/Eksportfinans
Apr-19
3.95% (fixed) + 1.75%
104
17
1st pri pledge in Volstad Viking
SMN
Dec-15
NIBOR + 3.25%
120
0
2nd pri pledge in Volstad Viking
SMN
Apr-15
NIBOR + 1.75%
285
28
1st pri pledge in Volstad Surveyor
SMN
Jun-21
NIBOR + 2.25%*
275
11
1st pri pledge in "newbuild" F/T Volstad
1,554
108
Total
185
2nd pri pledge in Volstad Supplier, Volstad Princess & Seabed Prince
* Fishing vessel debt margin subject to interest bearing debt/EBITDA ratio, margin will be 100 bps lower if budgeted EBITDA for 2013 is achieved
42
Resilient debt service capacity
Comments
Forecasts based on the following key assumptions:
–
–
–
–
–
•
•
•
•
Group 2013 EBITDA of NOKm 185 according to budget,
EBITDA at constant levels throughout 2018
EBITDA of NOKm 185 is net of annual provisions for
docking/class cost of NOKm 7.9 per year
Group debt terms according to details on page 42
Bank debt assumed re-financed at current terms at
maturity
Fleet values kept constant at current levels
60%
7.0x
6.0x
5.0x
4.0x
30%
3.0x
20%
2.0x
10%
1.0x
0%
0.0x
2013E
2014E
2015E
2016E
LTV gross (left)
NIBD/EBITDA (right)
Group net LTV of up to 50% after bond issue (gross up to
63%), declining to up to 30% (gross up to 46%) at
maturity
Group NIBD/EBITDA from 6.9x in 2013 to 4.0x in 2018
8.0x
40%
More than NOKm 50 of excess cash generated before
bond loan maturity in addition to Group cash balance of
NOKm 232 as of 31 December 2012
Group interest coverage ratio (EBITDA/interest cost)
around 3.0x
70%
50%
2017E
2018E
LTV net (left)
ICR** (right)
Group key financials
200
175
150
NOK mill.
•
Group key ratios*
125
100
75
50
25
-
2013E
(after bond
issue)
EBITDA
2014E
2015E
2016E
Amortizations (ex. bullet)
* Note key ratios shown from 1 May 2013 to 30 April 2018, EBITDA, interest and amortizations adjusted accordingly
** ICR = Interest Coverage Ratio (EBITDA / total interest cost)
2017E
Interest
2018E
(to bond
maturity)
Cash buffer
43
Profit and loss
Profit and loss
Profit and loss (Group)
NOKm
2009
2010
Audited
2011
2012
• All time high revenues in 2012
• Extraordinary effects resulted in a slight decline in
Group EBITDA for 2012
Revenue
Offshore
Fishery
295.5
203.6
66.6
359.3
261.8
92.3
404.6
289.6
103.2
412.7
309.6
91.5
Operating costs
(142.9)
(183.1)
(219.9)
(240.6)
EBITDA
Offshore
Fishery
152.5
176.2
184.6
172.1
146.0
26.4
Depreciation
(41.0)
(58.1)
(64.6)
(65.2)
EBIT
111.6
118.1
120.1
106.9
74.7
(89.7)
(71.0)
(28.9)
•
Profit before tax
186.3
28.4
49.1
78.1
•
Tax
(48.1)
(6.4)
(13.9)
(22.2)
Net income after tax
138.2
22.0
35.2
55.9
Revenue growth Y on Y
EBITDA margin
Offshore
Fishery
n/a
51.6%
n/a
n/a
21.6%
49.0%
n/a
n/a
12.6%
45.6%
n/a
n/a
2.0%
41.7%
47.2%
28.8%
Net finance
•
•
Seabed Prince expensed with a one-off of NOKm 4.0
due to preparations for new contract with Swire
5 year classifications completed for Volstad Viking
and Volstad Supplier, minor docking completed for
Volstad Surveyor - expensed in 2012 with NOKm
23.3
• Increasing management costs (crewing) due to
gradually transition to in-house vessel
management
Extraordinary cost of management estimated at
NOKm 4 for 2012
All external management agreements terminated by
April 2013 (full year effect in 2014)
• Extraordinary costs for 2012 totals NOKm 31.3
• Lower income in fishery in H2 2012 due to yard
stay (maintenance) and lower prices
•
Loss of fishing days
• Unrealised foreign exchange gains totals NOKm
23.7
44
Balance sheet
Balance sheet
NOKm
2009
2010
2011
Intangible assets
Vessels and equipment
Financial non-current assets
Total non-current assets
1,573.1
1.9
1,575.0
1,618.5
1.6
1,620.1
1,562.3
1.2
1,563.4
1,571.9
0.8
1,572.7
5.7
40.9
77.8
0.6
246.4
371.4
4.1
38.1
11.6
0.8
295.8
350.4
17.2
32.1
4.7
1.0
288.3
343.3
15.9
47.8
1.3
1.0
231.8
297.8
Total assets
1,946.4
1,970.5
1,906.7
1,870.5
Total equity
174.6
130.8
166.1
195.3
1,636.3
1,672.5
1,549.5
1,466.9
Deferred tax
49.4
69.7
83.6
122.3
Public charges
Trade payables
Other current liabilities
Total current liabilities
6.7
12.0
67.3
86.0
10.6
7.4
79.4
97.4
10.1
11.1
86.3
107.6
5.3
17.8
62.8
85.9
Total equity and liabilities
1,946.4
1,970.5
1,906.7
1,870.5
Equity ratio
Net interest bearing debt
9.0%
1,389.9
6.6%
1,376.8
8.7%
1,261.2
10.4%
1,235.2
Goods
Trade receivables
Other receivables
Other financial current assets
Cash and cash equivalents*
Current assets
Long term debt*
2012
• Total assets of NOKm 1,871
• Book value of vessels and equipment of NOKm
1,572 compared to market value of fleet of NOKm
2,349 at year end
•
•
Historical low yard cost of vessels as
vessel orders were placed with favorable
timing
Fishing licenses with book value of NOKm
51 compared to market value of NOKm
365
• Book equity of NOKm 195 and book equity ratio of
10.4%
•
Market adjusted equity ratio of 40.4% after
adjustment for restricted CIRR deposits*
• Total interest bearing long term debt* of NOKm
1,467
• Total cash* of NOKm 232 gives net interest
bearing debt of NOKm 1,235 at year end 2012
•
NIBD EBITDA 2012 of 7.2x
* Note: cash and debt balance includes NOKm 122.5 restricted CIRR deposits related to the existing financing of Volstad Supplier
45
Cash flow
Cash flow
Cash flow (Group)
NOKm
Profit before tax
Depreciation and amortization
Write off assets
Change in working capital
Change in other accruals
Other operating cash flow
Operating cash flow
2009
2010
Audited
2011
2012
186.3
41.0
1.3
16.3
(81.4)
(0.4)
163.0
28.4
58.1
(0.2)
(0.2)
82.1
(0.0)
168.2
49.1
64.6
(0.4)
(3.3)
12.8
0.0
122.7
78.1
65.2
0.6
7.8
(36.0)
115.7
Investing cash flow
(526.3)
(155.0)
(8.5)
(75.6)
Financing cash flow
359.9
49.5
(124.2)
(82.6)
Forex effects
Net cash flow
Opening cash balance
Closing cash balance
3.0
(13.3)
2.5
(14.1)
(0.4)
49.3
(7.4)
(56.5)
246.8
246.4
246.4
295.8
295.8
288.3
• Cash flow from operations of NOKm 116 in 2012
• Investing cash flow of NOKm 76 consists mainly of
installment on new fishing vessel under
construction
• Financing cash flow of NOKm 83 relates to normal
amortizations of of bank debt
• Cash balance of NOKm 232 at year end (including
restricted CIRR deposits), estimated to increase to
NOKm 314 after re-financing (excluding CIRR
deposits)
288.3
231.8
46
Risk factors
A number of risk factors may adversely affect the Group. The risks listed below are not the only ones facing the Company or the Group. Additional risks not
presently known to the Group or that the Group currently deems immaterial may also adversely affect the Group. If any of the risks facing the Group should actually
occur, the Group’s business, financial position and operating results, and the transactions described herein, could be materially and adversely affected. Prospective
investors should carefully consider the risks related to the Company and the Group, and should consult his or her own expert advisors as to the suitability of an
investment in securities of the Company. An investment in securities of the Company entails significant risks and is suitable only for investors who understand the
risk factors associated with this type of investment and who can afford a loss of all or part of the investment.
RISKS RELATING TO THE GROUP'S OPERATIONS
•
Risk of substantial liabilities: The Group could be exposed to substantial liabilities. For instance, under the Group’s time charter parties there is no cap on
liability, and i.a. losses caused by the Group's own gross negligence may not be covered by the Group’s insurance policies. The Group may also incur liability for
pollution and other environmental damage without being able to recover said liabilities through insurance.
•
Operating hazards: The Group's operations may be suspended because of machinery breakdowns, abnormal weather conditions, and/or failure of
subcontractors to perform or supply goods or services, personnel shortages etc.
•
Counterparty risk: Although the Group has reputable customers, the Group’s shipping services are subject to the risks associated with having a limited number
of customers for its services. Lack of payments from any of the Group's costumers or other future contracting parties may significantly and adversely impair the
Group’s liquidity.
•
Limited fleet and contracts: Since the Group's fleet presently consists of only a limited number of vessels, any operational downtime under the time charter
parties or any failure to secure new employment at satisfactory rates at the expiry of each time charter will potentially affect the Group's results more significantly
than for a group with a larger fleet.
•
Operating cost vs. operating revenues: The Group’s operating and maintenance costs will not necessarily fluctuate in proportion to changes in operating
revenues.
•
Time charter parties close to expiry: Two of the Group's four time charter parties expire during 2013, and one expires in Q2 2014. The fourth and last time
charter party expire in Q4 2016. There may be uncertainty as to whether or not the Group will be able to secure new employment of the Vessels without longlasting off-hire periods between the charters. The level of future charter hire also remains uncertain. A mitigating factor is the Group’s Bareboat contract with
Swire expiring in May 2017.
•
Termination risk: Under certain circumstances the Group’s future contracts may permit a customer to terminate their contract early without the payment of any
termination fee, as a result of non-performance, longer periods of downtime or impaired performance caused by equipment or operational issues, or sustained
periods of downtime due to force majeure events.
•
Exposure to technical risk and off-hire: The Vessels are mainly on timecharters. As owner under timecharter arrangements, the Company carries the risk of
operational and technical problems which may result in off-hire. While the operational track-records of the Vessels till date are satisfactory, any off-hire could
adversely affect the Company's financial condition, however the Company is insured against off-hire exposure (see page 19 for further details on insurance).
•
New-building risk: The factory trawler under construction is currently expected to be delivered on time and budget, however, there is always an inherent risk
related to delays and budget overruns related to new-buildings.
•
Risk of being a small company: The Company and its subsidiaries are a small shipping group, which may be a competitive disadvantage when competing for
certain contracts, as larger competitors may be perceived as more solid and/or experienced subcontractors than the Group.
47
Risk factors
Continued
•
Maritime liens: The laws of various jurisdictions in which the vessels may operate may give rise to the existence of maritime liens which may take priority over
the liens securing the Bonds.
•
Management/personnel risk: The successful development and performance of the Group’s business depend on its ability to attract and retain skilled
professionals with appropriate experience and expertise. Any loss of the services of any of the senior management or key personnel could have a material
adverse effect the Group's business and operations.
•
Risk of labour interruptions: Labour unrest could prevent or hinder the Group’s services from being carried out normally and, if not resolved in a timely and
cost-effective manner, could have a material adverse effect on its business, results of operations, cash flows and financial condition.
•
Upgrades, refurbishment and repair: The timing and costs of repairs on ships can be difficult to predict with certainty and may be substantial. Many of these
expenses, such as dry-docking and repairs for normal wear and tear, are typically not covered by insurance. Large repair expenses could decrease the Group’s
profits. In addition, repair time means a loss of revenue. Even though the Group has had little past troubles or malfunctioning of its Vessels there can be no
assurances that such incidents will not occur in the future.
•
Valuations of the Vessels are inherently subjective: The Company Presentation makes reference to independent third party valuation reports from three
independent offshore vessel brokers, produced in January, 2013, in respect of the Vessels. The valuations are inherently subjective and the valuations of the
Group’s vessels contained in this Company Presentation are subject to significant assumptions.
•
Majority owner: Mr. Eivind Volstad is CEO, a board member and currently owns 100% of the shares in the Company and thereby fully controls the Group, and
may, within applicable law, act in manners that are not in the best interests of the holders of the Bonds.
•
Unexpected risks: Although the Company tries to keep an overview of all known risks related to its operations, there is a risk that the Group will be subject to
unexpected incidents and occurrences resulting from additional unknown risks and uncertainties, perhaps beyond its control.
FINANCIAL RISK
•
Limitation in debt arrangements: The Group’s bank loan agreements contain customary covenants and event of default clauses, including cross default
provisions. The bank financing agreements contain, inter alia, conditions to be satisfied in order for committed funds to be made available to the relevant Group
member, as well as restrictive covenants and performance requirements, which may affect operational and financial flexibility.
•
Financial covenants: If the Group is unable to comply with the restrictions and the financial covenants in the agreements governing its indebtedness, there
could be a default under the terms of these agreements, which could result in an acceleration of repayment of funds that have been borrowed.
•
Interest rate and exchange rate risk: Interest rate fluctuations could affect the Company’s profitability, earnings and cash flow. The Company has no
outstanding hedging instruments but actively monitors and manages its currency and interest rate exposure. The Company has both NOK and USD facilities
loans and its revenues are generated in NOK and USD thus providing a natural cash flow matching. Volstad AS has a CHF 15,5 million facility and the Company
holds futures contracts of CHF 54,9 million. The Company's expenses are mainly in NOK, thus rendering the Company exposed to an exchange rate risk.
•
Financing of subsidiaries: If the Company fails to support its vessel-owning subsidiary’s debt servicing, the banks providing the subsidiary loan facilities may
become entitled to declare the loan facilities to be in default, following which all amounts under the loan facility will become due and payable.
48
Risk factors
Continued
•
Litigation: The operating hazards inherent in the Group’s business expose the Group to litigation, including personal injury litigation, environmental litigation,
contractual litigation with clients, IPR litigation, tax or securities litigation, and maritime lawsuits including the possible arrest of the Group’s vessels.
•
Requisition of the Vessels: The Group's Vessels could be requisitioned by a government in the case of war or other emergencies or become subject of arrest
or detention.
MARKET RISK
•
Market value risk: The market value of the Groups Vessels may decrease, and the Group may also be unable to sell or otherwise dispose of its assets at prices
the Group believes is the correct price for such assets.
•
Competition: The oilfield services industry is highly competitive and fragmented and includes several large companies that compete in the markets the Group
serves, or will serve, as well as numerous small companies that compete with the Group on a local basis.
POLITICAL AND REGULATORY RISK
•
Governmental risk: The Group and its subsidiaries are subject to the international laws and regulations governing the shipping industry. In the event that the
Group is unable at any time to comply with the existing regulations or any changes in such regulations, or any new regulations introduced by local or
international bodies, the operations may be adversely affected.
•
Environmental liability: The shipping and offshore business is subject to environmental rules and regulations pursuant to international conventions and national
legislation in relevant jurisdictions. Breach of these rules and regulations may result in fines, penalties and/or claims by authorities, customers and other third
parties. New legislation and/or rules may result in stricter and/or more expensive requirements to be complied with.
•
Political and geo-political risks: Changes in the legislative, political, fiscal and regulatory framework governing the activities of the Group, oil companies, oil
service companies, construction yards and/or major suppliers or service providers on which the Group depend, could have material impact on the demand for
the Group’s services by impacting exploration, production and development activity or affect the Group’s operations and/or financial condition directly.
•
Legislation and tax laws: The Group may become subject to future changes to current legislation and tax laws under which the Group operates, which the
Group cannot avoid or influence.
RISKS RELATED TO THE BONDS
Market for the bonds: The Bonds will be new securities for which there is currently no trading market. The liquidity of any market for the Bonds will depend on the
number of holders of those Bonds, investor interest at large and relative to the Company and its business segment in particular, and the interest of securities
dealers in making a market in those securities and other factors.
49
Contents
1
Investment summary & transaction details
2
Company overview
3
Security specification
4
Market overview
5
Financial information & risk factors
6
Appendix
Bank facilities – main terms
NOKm 145 Eksportfinans and DVB Guarantee
NOKm 113.75 + USDm 41.50 senior bank facilty
Lenders
DVB and Eksportfinans
Lenders
DVB, Eksportfinans and SpareBank 1
SMN
Borrower
Volstad Shipping AS
Borrower
Volstad Shipping AS
Outstanding amount
NOKm 145
Amount
NOKm 113.75 + USDm 41.50
Drawdown
26.05.2008
Drawdown
Identical to Settlement date for the
contemplated bond issue.
Maturity
31.12.2020
Maturity
5 years from drawdown
Margin
• 4.45 % (Eksportfinans)
• 1.35% (guarantee commission)
Margin
• CIRR + 1.75% (Eksportfinans)
• LIBOR + 3.25 % (bank loan)
Amortisation
NOKm 19.3 p.a. (12y profile)
Amortisation
NOKm 32.7 p.a. (10.7y profile)
Financial covenants
•
•
•
•
•
Value adjusted equity > 25%
Minimum cash: NOKm 25
Working capital > NOKm 36
Average charter coverage > 1 year
LTV (on security) < 71.4%
Undertakings
•
•
•
•
Cross default
Insurance
Negative pledge
Dividend
Security
1st priority pledge in Princess, Prince
and Supplier
•
•
•
•
Equity ratio > 15%
Equity ratio (on vessel) > 20%
Working capital > NOKm 36
Minimum cash: NOKm 17.5
Undertakings
•
•
•
•
Cross default
Insurance
Financial indebtedness
Dividend
Security
1st priority pledge in Princess
Financial covenants
The described structure is including, but not limited to the above mentioned terms
51
F/T Volstad (1998) and F/T ”Volstad” (2013)
Key data, F/T Volstad anno 1998
Status
Operated (in-house) by Volstad AS
Owner
Volstad Shipping AS 100%
Median broker value
NOKm 125
Fishing licenses
value
NOKm 365
Financial details, fishery fleet
Annual EBITDA*
NOKm 31
Loan details, F/T “Volstad” under construction
Borrower
Lender
Volstad Shipping AS
SpareBank 1 SMN
Loan amount
NOKm 275
Amortization
4% / 25y
Maturity Date
Jun. 2021
Coupon
NIBOR + 2.25% p.a.
* 2013 budget excluding provisions for docking/class costs
52
Volstad Surveyor
Key data
Status
On T/C to DeepOcean
Owner
Volstad Shipping AS 100%
Median broker value
NOKm 395
Contract details
Fixed period
To November 2016
Option period
3 x 1 years
Annual EBITDA*
NOKm 63
Technical data
Built
Design
2010
Skipsteknisk ST-253
Dimensions
85.3m x 18m
DWT
~2,200T
650m2
Deck area aft of
hangar
Crane
70T offshore crane
Other
Helideck, 1 tuggerwinch 10t,
2 capstans each 10t,
Work ROV
* 2013 budget excluding provisions for docking/class costs
53
Volstad Viking
Key data
Status
On T/C to ConocoPhilips
Owner
Volstad Shipping AS 100%
Median broker value
NOKm 355
Contract details
Fixed period
To June 2014
Option period
2 x 1 years
Annual EBITDA*
NOKm 28
Technical data
Built
Design
2007
Skipsteknisk PSV ST-216 L CD
Dimensions
93.4m x 19.2m
DWT
5,100T
1,060m2
Deck area
Crane
1x4t / 10m, 1x1.5t / 8m
Other
Clean Design
* 2013 budget excluding provisions for docking/class costs
54
Charter contracts (Surveyor and Viking)
Contract terms
Volstad Surveyor
Volstad Viking
Type of charter
Time charter (BIMCO, supplytime 2005)
Time charter
Charter party and vessel owner
Volstad Shipping AS
Volstad Shipping AS
Vessel
Volstad Surveyor
Volstad Viking
Flag
Malta
NOR
Charterer
DeepOcean AS
ConocoPhillips Skandinavia AS, ConocoPhillips (U.K.) Limited,
ConocoPhillips Petroleum Company U.K. Limited
Geographic operational region
World-wide, but in accordance with relevant local/national law,
and always within International Navigation Limits. The charter
rate is based on Europe/Mediterranean trade area. Extra costs
related to operationS outside said area will be charged the
charterer on an actual extra costs basis.
UK, Netherlands, Danish and Norwegian Sector of the North
Sea. Change in area of operation is subject to mutual
agreement between the parties.
Date of delivery
1 March 2012 (in direct continuation of the charter dated 7
January 2011)
Indirect continuation as per current previous contract term.
(Effective date of the charter party: 1 June 2012 at 08:00
hours)
Period of hire
4 years and 7 months
2 year initial period
Extensions options
3 x 1 annual options in charterers favor, subject to 4 months
notice
2 x 1 year option in favor of the charterer, subject to notice 9
months prior to the end of the initial period
Charter hire (start)
NOK 232,500/day pro rata
Year 1 and 2:
The owner pays for all costs, provisions, wages and expenses
for master, officers and crew. The charterer pays for other
normal cost such as i.a. fuel, water, pilotage, harbour,
tonnage, loading/unloading, shoring equipment, custom duties,
permits, NOx and UREA fees etc
NOK 165,000/day
NOK 232,500
NOK 165,000/day
Charter hire (current)
Excluding fuel, NOx fee and miscellaneous costs (port
charges/harbour expenses, pilotage, loading/unloading etc.)
55
Charter contracts (Surveyor and Viking)
Continued
Contract terms
Volstad Surveyor
Volstad Viking
Escalation
Annual adjustment after 12 months with an annual 2 % increase Escalation of the operating cost element shall be in line with the
for the spread. First time 1 March 2013.
change in the previous year's Consumer Price Index i.e. year 1:
1 June 2013 to June 2014, and year 2: June 2014 to June 2015
Escalation of the crew cost will be the change in
"Offshoreservicefartoyer" from June 2012- June 2013 (year 1),
and June 2013 to June 2014 (year 2)
Current day rate elements:
Finance costs = NOK 82,000, Operating costs = NOK 25,000
Crew costs = NOK 58,000
Assignment, sub-charter and
sale
a) The charterer is entitled to sublet, assign, or loan the vessel
to any person or company not competing with the owner,
subject to the owner's approval, which shall not unreasonably
be withheld. The charter remains however, always responsible
for due performance of the charter party.
b) The owner may not assign or transfer any part of the charter
without prior written approval of the charterer, which shall not
unreasonably be withheld. The owner remains however
responsible for due performance of the services which are
sublet or assigned.
The charterer may not assign or sub-charter the vessel, without
the prior written consent of the owner, which shall not be
unreasonably withheld or delayed, except that charterer may
sub-charter the vessel or assign its rights and obligations under
the charter to any co-venturers or affiliates (as defined in the
charter), without owner's approval. The charterer is however not
in any instance relieved of its responsibility for due performance
of this charter party.
Non-competition
N/A
Purchase option
The charterer has a first right of refusal to match any
N/A
documented offer on the vessel from any third party to purchase
the vessel in part or fully. Should the charterer elect not to
purchase, they have the right to terminate the charter on the
date off full or part transfer of the vessel to the new owner.
Dispute resolution/governing
Norwegian law, arbitration in Oslo, Norway
law
N/A
Norwegian law, arbitration in accordance with Act relating to
Arbitration, 14 May 2004 no 25.
56
Charter contracts (Surveyor and Viking)
Continued
Contract terms
Volstad Surveyor
Volstad Viking
Liability/insurance
Knock for knock allocation of responsibility. There is no cap on
the liability. Neither party is liable for consequential damages.
The owner is liable for damages from any pollution or
contamination emanating from the vessel (but not from cargo).
Knock for knock allocation of responsibility. There is no cap on
owner's liability. Neither party is liable for consequential losses.
Owner is liable for damages from any pollution or contamination
emanating from the vessel (but not from property or equipment
of the charterer).
The charterer is responsible for losses, damages or liabilities
which are directly or indirectly due to the vessel's carriage of
hazardous or noxious substances.
The owner is responsible for insurance.
When the owner performs work for Ensco Offshore U.K. Ltd and
Ensco Netherlands Limited (together "Ensco"), the owner
agrees to indemnify and hold the charterer harmless from any
and all liability, claim, damages etc. involving or arising out of
loss of or damage to equipment or property belonging to Ensco
caused by the negligence of the owner for an amount at or
below USD 50,000,000 per occurrence. For any loss or damage
above US 50,000,000, the charterer shall indemnify the owner
to the extent the charter has an enforceable indemnity from
Ensco and, where applicable, has received payment from
Ensco.
The owner is responsible for insurance.
Termination clause
Right to termination for cause for such as requisition,
confiscation, bankruptcy, loss of vessel, breakdown – all
occurrences must exceed 3 days in order to terminate, except
for force majeure which is reason for termination if the force
majeure period exceeds 15 days.
a) Termination: The charterer may terminate with immediate
effect upon notice to the owner in the event of i.a. liquidation or
bankruptcy of the owner, loss or confiscation of the vessel,
material default by the owner, force majeure, off-hire for a
continuous period of 3 months in any 365 day period.
b) Cancellation: The charter may at any time cancel the charter
upon written notice. In such event, the charter will pay the
owner hire up to the expiry of the charter period in which the
notice was given, however, the owner shall do its utmost to find
alternative employment for the vessel during the outstanding
charter period, and if the hire achieved is lower than the original
hire, the charterer shall reimburse the difference. Any new hire
received in excess of the original hire shall be equally shared
between the parties.
57
Charter contracts (Surveyor and Viking)
Continued
Contract terms
Volstad Surveyor
Volstad Viking
Mortgage
N/A
N/A
Miscellaneous
Off-hire:
Off-hire:
If the vessel is prevented from working due to any deficiency of
crew or the owner's stores, strike of master, officer and crew,
breakdown of machinery, damage to the hull or other accidents
to the vessel, no hire shall be payable.
No hire shall be payable in the event of loss of time not due to
the charterer (i.a. deficiency of Master, officers or crew or ship's
stores, breakdown of machinery, detention of ship time in drydock, maintenance, arrests or boycotts – whether illegal or not,
force majeure).
The owner is granted 12 hours on hire per month for
maintenance and dry-docking, accumulated up to a maximum
of 15 days.
Hire shall still be payable if the Vessel is prevented from
working due to reasons on charterer's side, i.a. the carriage of
explosives and dangerous cargo or hazardous/noxious
substances, exposure to abnormal risk at the request of the
charterer, detention or damage by ice, any act or omission of
the charterer, their servants or agents.
Change of ownership:
The owner's rights and obligations are not transferable, either
by sale, change of ownership or flag, change of management
company or assignment without the charterer's written consent,
which shall not be unreasonably withheld. The charterer has the
right to terminate the charter if the vessel is disposed of without
their consent. No termination fee or de-mobilisation charge shall
be payable by the charterer in such event.
58
59