Prosafe has reached agreements with COSCO and its lenders which will transform the company’s fleet, market position and earnings potential, and secure a significantly enhanced financial runway.
This is made inline with the possibility of allowing a flexible delivery and long-term financing of Safe Eurus, Safe Nova and Safe Vega.
COSCO delivery deal
The Agreement with COSCO includes the following main terms (details set out in Attachment 1):
- Flexible option for delivery of the Units over a period of up to 5 years
- A direct discount of USD 55 million to the combined original contract price for the Units
- No payment obligations until delivery. Total remaining cash payments of USD 100 million combined for the three Units as they are delivered
- Long-term financing from COSCO of approx. USD 431 million in total for a period of between 5 and 10 years from delivery of each Unit
- Repayment of yard finance (Promissory Notes) and interest rates linked to future earnings and day rates achieved
- COSCO waiving accrual of lay-up costs of up to USD 24 million for Safe Eurus on delivery of such Unit. No lay-up costs for Safe Nova and Safe Vega
- 50/50 profit split (on adjusted EBITDA basis – ‘EBITDA’) between COSCO and Prosafe after repayment to Prosafe of mobilisation and stock-up costs of up to USD 20 million per Unit and subject to COSCO receiving the minimum annual amortization payment.
Outstanding conditions precedent and final approvals for the Agreement are expected to be confirmed within August.
The Agreement provides a very attractive solution for both Prosafe and COSCO. Prosafe achieves commercial flexibility to take the Units to market as opportunities materialise in the years ahead, whilst COSCO secures a delivery gateway for its key semi-submersible accommodation new builds via a leading accommodation vessel operator.
Leverage its financial stand
Prosafe has also been in recent discussions with its lenders for its loan facilities to enable it to fully utilise the strategic optionality and flexibility provided by the new Agreement, preserve values in the near term and potentially increase longer term cash flow for the benefit of all stakeholders. The amendments of the loan facilities to support the strategic transformation of the Company and to significantly improve its financial position in the years ahead include (details set out in Attachment 2):
- Extended runway by way of continued reduced amortization and one (1) year maturity extension option to its main USD 1.3 billion credit facility. The USD 144 million facility for Safe Notos will be serviced in accordance with the current amortization and maturity profile
- Continued covenant ease for both the USD 1.3 billion and the USD 144 million facilities
- Consent to consummate the Agreement with COSCO including the use of the Company’s cash to fund delivery of the Units, in consideration for an initial margin uplift of 60 bps to USD 1.3 billion facility and the lenders having the option to elect either a further increase in interest margin or warrants for a maximum of 9.78m shares linked to the delivery of both the Safe Nova and Safe Vega (assuming that the USD 1.3 billion facility is still outstanding at those times).
- Flexibility to scrap up to three existing Prosafe vessels which are currently collateral under the relevant loan facilities without repayment of the corresponding collateral value to the lenders
A Positive response
Prosafe says that it has got approx. 94 per cent of the support from lenders to the amendments, but its subject to final credit approvals and customary conditions precedents, and it expects finalization within August.
In a comment, Mr. Jesper Kragh Andresen, CEO of Prosafe says; “The agreement with COSCO combined with the flexibility to possibly scrap up to another three legacy vessels will significantly change our fleet profile. Prosafe will be able to attain a modern and competitive fleet with future earnings potential for the long term. The agreement with our lenders includes improved financing terms and implies an extended financial runway as well as the ability to finance the staged delivery of the 3 vessels from existing cash and cash-flow from operations. The combination of the agreement with COSCO and the agreement with our lenders is expected to create value for all stakeholders”.
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Source: Prosafe
