J. Lauritzen A/S Investor Presentation re. Consent Solicitation and Tender Offer - February 2017
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J. Lauritzen A/S Investor Presentation re. Consent Solicitation and Tender Offer February 2017 www.j-l.com | Oceans of know-how
Continued dry bulk market deterioration has impacted capital structure
- Dry Bulk outlook: 2017 to be as challenging as 2015 and 2016
- J. Lauritzen works on several initiatives to further strengthen capital structure and reduce financial obligations
Selected key figures $m Baltic Dry Index
200 875
100 775
675
0
575
-100
475
-200
375
-300 275
-400 175
2011 2012 2013 2014 2015 2016 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jan/17
Source: Bloomberg
EBITDA EBIT
Result for the year Special items, net
The very challenging market conditions, in particular for dry bulk shipping have resulted in negative return on
J. Lauritzen’s business activities for the past six years
We have responded by adjusting our business portfolio, reduced of debt, secured long-term financing and
intensified the efforts to create value from operational excellence
Limited operational cash flow generation near-term but improvements scheduled to come slowly in subsequent
years. However, not a pace commensurate with current debt repayments and charter obligations
2 February 2017 – Presentation re. Consent Solicitation and Tender OfferJ. Lauritzen has adapted decisively to the market situation
- Strong support from Lauritzen Fonden has enabled a significant balance sheet improvement
- Next step is an agreement with financing providers
Key developments Illustrations (all figures in $m)
2682
2315
1877
Shift towards an asset-light and customer-centric dry bulk chartering
1160 1208
Continued operation has enabled a significant deleveraging of the balance sheet 685 631 859
617
delevering of Total assets reduced from $2.7bn as of 2011 to $617m as of Q4 2016 268 284
balance sheet 160
Nominal NIBD reduced by almost 90% in the same period
2011 2012 2013 2014 2015 2016
Total Assets Net debt
$181m capital structure improvement made possible by a highly supportive
181
owner
56
Divestment of Sale of Hafnia Tankers and Danish Ship Finance shareholdings
non-core 19
Sale of Axis Offshore shares and bonds also reduces future capital
assets
commitments
106
Strong support $19m in equity injection
from Lauritzen Transfer of the purchase obligation of two ethylene gas carriers reduced
Fonden capital commitments by $56m, while retaining commercial and technical Sale of Equity Transfer of Total
assets issue purchase support
management in Lauritzen Kosan obligations
90
Sales and cancellation of newbuildings, postponement of deliveries and
Postponement
and adjustments to leasing obligations have significantly eased J. Lauritzen's
cancellation of funding requirements and liquidity situation
newbuilding Only one part-owned newbuilding with delivery in 2018 remains (in 0
obligations addition to eight time-chartered newbuildings) Commitment own Commitment own
NBs, 2015 NBs, Q4-16
3 February 2017 – Presentation re. Consent Solicitation and Tender OfferProcess objectives
1. Maintain balance sheet liquidity near term
2. Source equity contribution from Lauritzen Fonden to enhance credit profile of business
3. Optimise debt structure for sustainability in the medium-term
4. Extend maturity of financing and reduce amortization burden
5. Reduce future financing risk and credit exposure
4 February 2017 – Presentation re. Consent Solicitation and Tender OfferSummary of Proposed Solution
- Combination of $30m new equity + senior debt amendment + partial bond buyback & extension
Summary of Proposed Solution
$30m to be provided by Lauritzen Fonden, applied pro rata in repayment of bond and swap MTM
Highlights: Shareholder $-for-$ guarantee of senior lenders’ amortisation deferrals until maturity of term loans; swap counterparties to benefit
support from second-ranking lien on guarantee until maturity of the swap
Significant
support from c. $11m cash equity to be provided in partial repayment of Dan Swift facility (+ 3-year amortisation holiday agreed)
Lauritzen
Fonden Extension of vessel loan maturities to 2021 Q2-Q3 (excluding two loans, maturing in during 2021Q4 – 2023)
Partial Average 50% amortisation relief over 48 months with partial front loading of reduced payments and subsequent
deleveraging Vessel loans catch-up
and capital Covenant amendments: minimum liquidity covenant of the higher of $25m and 10% of consolidated interest bearing
structure de- debt, grandfathering of operating lease treatment under equity ratio and working capital ratio
risking
Preserved Bond reduced through a tender of bonds for a nominal amount up to the NOK equivalent of $20m net of fees @
balance sheet 95.00%
cash position NOK Bond Maturity extended for the residual amount of the bond to October 2021
Support to Covenant amendments: $25m minimum liquidity covenant, grandfathering of operating lease treatment under equity
headline terms ratio
agreed with
Cross-currency Blend-and-extend swap structure
Lauritzen
swap Swap partially closed out and remaining notional extended until October 2021
Fonden and
certain Restrictions on new long term time-charters
secured
creditors Other Quarterly cash sweep to prepay senior creditors. The cash sweep is only triggered if the cash balance exceeds a
defined threshold. Total amount of cash swept over the life of the facilities shall not exceed the quantum of deferred
loan repayments and any loss on the cross-currency swaps
Support from each stakeholder group inter-dependent to implement the proposed plan
Note
1 Assumes cancellation of bonds held in JL Treasury
2 Transaction costs include 50bps consent fee to banks in return for participation in the amended capital structure
3 Grandfathering of operating lease treatment in order to cater for new IFRS 16 accounting standard
5 February 2017 – Presentation re. Consent Solicitation and Tender OfferProposal to NOK bondholders
- Combination of approximately $20m tender + partial bond extension
- Financial covenants to be addressed to match relative size of balance sheet
NOK Bonds – Tender Offer and Consent Solicitation
Highlights: Tender Offer and Bondholders are offered a choice between (a) cash and (b) extension notes:
Consent a) Selling their bonds for cash proceeds in the Tender Offer; or
Bondholders Solicitation b) Submitting a voting instruction in the Consent Solicitation
significantly
de-risked JL will tender for a nominal amount up to the NOK equivalent of $20m net of fees.
through Investors who tender will receive the tender cash price of 95% and the Amendment Fee of 2%. Tendering Investors will
tender of c. automatically submit a vote in favour of the consent solicitation and also be eligible for the Early Consent fee of 1%
$20m of a) Tender The acceptance in the tender offer will be capped at the NOK equivalent of $20m net of fees. If tender instructions exceed the
bonds offer NOK equivalent of $20m net of fees, such Bondholders will be downscaled on a pro-rata basis in the acceptance. If Bondholders
representing less than the NOK equivalent of $20m net of fees in nominal terms tender, then all non-tendering Bondholders will
Covenants be taken out on a pro-rata basis for an amount equal to the NOK equivalent of $20m net of fees minus the amount received in
amended to the tender acceptance. Bondholders will then also receive a cash element in return for their tendered holdings
an
appropriate Amendments to loan agreement:
level relative Maturity date amended from 24 October 2017 to 24 October 2021 (4 year extension)
to size of
Minimum free cash amended from $50m to $25m
balance
b) Consent Amendment of the equity ratio definition to include grandfathering of operating lease treatment (to cater for new IFRS 16
sheet
Solicitation accounting standard). Covenant to remain at 30%
Preserves American call at par until maturity date
liquidity
Allow a partial early call (ensuring a cash take-out of an amount equal to the tender cap less the tender take-up) at a price of
through 95%
reduced
interest costs Amendment Fee Upon approval of the Consent Solicitation by the Bondholders’ Meeting, all Bondholders will be paid an Amendment Fee of 2%
Improved
Early Consent fee: 1%
relative
position due Early Consent Bondholders who tender their bonds in the Tender Offer will be eligible for the Early Consent Fee
to reduction Fee Bondholders who consent to the Consent Solicitation will be eligible for the Early Consent Fee if the Consent is received by the
of bond debt Tender and Paying Agent before March 8th, 12:00 CET
Note:
1. Please see Tender Offer and Consent Solicitation Memorandum for further details
2. Fee payments and the Tender will be conditional on the passing of the resolution and on the implementation of the resolution
3. Conditions precedent to effectiveness as outlined on page [8]
6 February 2017 – Presentation re. Consent Solicitation and Tender OfferNotable impact on JL’s repayment profile from proposal
- Partial repayment of JLA 02 and the connected hedging by a total c. $30m and extension of remainder
- Extending bank facility maturities to 2021Q2-Q3 and remaining bonds to Oct-2021
- Repayment relief of avg. 50% during four years with partial front loading of payments. Catch-up subsequently
Outstanding debt in $m, at end-of-year Repayment profile in $m
350 250
Current debt profile Current repayment profile
300
200
250
150
200
150 100
100
50
50
0
0
2016 2017 2018 2019 2020 2021
2016 2017 2018 2019 2020 2021
Bank loans Bonds Repayments Bullets (bank loans) Bond maturity
350 250
Proposed debt profile Proposed new repayment profile
300
200
250
200 150
150
100
100
50 50
0
2016 2017 2018 2019 2020 2021 0
2016 2017 2018 2019 2020 2021
Bank loans Bonds Repayments Bullets (bank loans) Bond maturity
Deferrals: Secured loans c. $68m (repayments). Cross-currency swaps c. $20m. Bond debt c. $30m
Note: Data as per end-year 2016
• All numbers shown are forecasts and can change (reflecting full participation by all lenders)
• Non-USD debt at hedged value. Bond debt at hedged value less JL’s own bond holding.
7 February 2017 – Presentation re. Consent Solicitation and Tender OfferEnvisaged time line
- Closing conditions below must be met to implement and close the financing proposal
February-17 March-17 April-17
M T W T F S S M T W T F S S M T W T F S S
1 2 3 4 5 1 2 3 4 5 1 2
6 7 8 9 10 11 12 6 7 8 9 10 11 12 3 4 5 6 7 8 9
13 14 15 16 17 18 19 13 14 15 16 17 18 19 10 11 12 13 14 15 16
20 21 22 23 24 25 26 20 21 22 23 24 25 26 17 18 19 20 21 22 23
27 28 27 28 29 30 31 24 25 26 27 28 29 30
Announcement and Annual Report Consent Period End of tender period and early consent fee deadline Bondholders’ meeting Est. completion date
Closing conditions Est. completion date
Shareholders Lauritzen Fonden (as owner of the issuer) has subscribed for (and paid) new equity to be issued by the issuer April 2017
Commitment to a financing offer is confirmed from secured lenders representing at least $200m (approx. 80%) of the consolidated secured bank April 2017
debt. The financing offer shall comprise:
A reduction of the amortisation schedule by an average of 50%, over a four-year period compared to existing amortisation schedules on the
Vessel Loans
secured bank debt
An extension of bank debt facilities from the original maturities in 2019 and 2020 to 2021Q2-Q3
Covenant amendments: $25m minimum liquidity covenant, grandfathering of operating lease treatment under equity ratio
Receipt of tender offer from the bondholders representing a nominal amount of up to approximately $20m March 14th
Evidence that a resolution has been passed at a Bondholders’ Meeting adopting:
Bondholders
A 4 year extension of the bonds to 24 October 2021
Amendment of minimum free cash covenant and pre-IFRS 16 grandfathering in relation to the calculation of equity ratio
Swap providers Extension of cross-currency swaps for the hedging of the remaining notional amount of the bonds April 2017
Long stop date set to 14th June 2017
8 February 2017 – Presentation re. Consent Solicitation and Tender OfferSummary
- The proposal is a balanced and consensual approach ensuring a suitable capital structure for JL
Partial deleveraging and capital structure de-risking
Strong support from Lauritzen Fonden with c. $30m equity contribution, applied pro-rata towards repayment of MTM (c.
$10m) and NOK bond (c. $20m)
Secured lenders to contribute by c. $68m in loan amortization deferrals and c. $20m in derivative contracts deferrals /
extensions
Adjustment of financial covenants to fit a slimmed and trimmed business model and balance sheet - thereby avoiding
disruptive covenant breaches
Partial repayment of NOK bond in an amount equal to c. $20m and deletion of NOK53m of bonds held in treasury in
order to improve future liquidity through reduced interest costs
Bondholders benefit from the reduced principal amount which improve prospect for full recovery
9 February 2017 – Presentation re. Consent Solicitation and Tender OfferDisclaimer
• This presentation contains forward-looking statements concerning J. Lauritzen A/S (“J. Lauritzen”, “JL” or the “Group”) and its financial condition, results of
operations and business. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking
statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown
risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements.
• Forward-looking statements include, among other things, statements concerning J. Lauritzen’s potential exposure to market risks and statements expressing
management’s expectations, beliefs, estimates, forecasts, projections and assumptions. There are numerous factors that could affect J. Lauritzen A/S’ future
operations and could cause J. Lauritzen A/S’ results to differ materially from those expressed in the forward-looking statements included in this presentation.
• All forward-looking statements contained in this presentation are expressly qualified by the cautionary statements contained or referenced to in this statement.
Undue reliance should not be placed on forward-looking statements.
• Each forward-looking statement speaks only as of the date of this presentation. J. Lauritzen does not undertake any obligation to publicly update or revise
any forward-looking statement as a result of new information or future events other than required by applicable law. In light of these risks, results could differ
materially from those stated, implied or inferred from the forward-looking statements contained in this presentation.
• While the information in the presentation is believed to be accurate, no representation or warranty, express or implied, is or will be made in relation to the
accuracy or completeness of this presentation or any other written or oral information transmitted or made available to any person or its advisors in connection
with any investigation of the Group and no responsibility or liability is or will be accepted by the Group or any of their respective affiliates and representatives.
In particular, no representation or warranty, express or implied, is or will be given as to the achievement or reasonableness of any statements, estimates and
projections with respect to the anticipated future performance of the Group and the market for the Group’s products and services.
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