Hunter Group ASA – Enters into definitive VLCC contract transfer agreements with Apollo Asset Ltd.
Oslo, 26 April 2018
Reference is made to previous announcements concerning the non-binding indicative offer from Apollo Asset Ltd. (“Apollo”), upon which Apollo, a company controlled by board member Arne Fredly, indicated its willingness to transfer four (4) VLCC shipbuilding contracts and options for up to three (3) more VLCC shipbuilding contracts to Hunter Group ASA, as first announced on 10 April 2018 at 08:53 (the “OSE Notice”).
The board of directors of the Company has today signed a definitive back-to-back contract transfer agreement (the “Contract Transfer Agreement”) with Apollo in connection with the transfer of the Shipbuilding Contracts, Option Agreement, Refund Guarantees and certain rights in respect of specifications review services (as defined below).
The ultimate owner of Apollo, Mr. Arne Fredly, is a board member of the Company, and has, pursuant to the Norwegian Public Limited Companies Act section 6-27, not participated in the Company’s decisions in connection with the Contract Transfer Agreement.
The object for the Contract Transfer Agreement
Before the execution of the Contract Transfer Agreement, Apollo has entered into four (4) shipbuilding contracts and four (4) corresponding supplemental agreements with Daewoo Shipbuilding Marine Engineering Co., Ltd. (the “Builder”), dated on or about February/March 2018 respectively (together, the “Shipbuilding Contracts”), for the construction and delivery of four (4) 300,000 DWT ECO Design Crude Oil Tankers, having Builder's hull Nos. 5455, 5456, 5457 and 5460 (together, the "Firm Vessels"), and one (1) option agreement dated 27 February 2018 (the "Option Agreement") for the construction and delivery of three (3) optional vessels with identical specifications as the Firm Vessels (together, the "Optional Vessels") (the Firm Vessels and the Optional Vessels together referred to as the "Vessels").
As set out in the OSE Notice, the Shipbuilding Contracts and Option Agreement contain the following key terms, without any mark-up or additional fees to Apollo other than the Warrants (as described below):
Shipbuilding Contr. Contract amount Scrubber Tot. contract amount Delivery
No. 1 MUSD 82.5 MUSD 2.7 MUSD 85.2 Oct./Nov. 2019
No. 2 MUSD 82.5 MUSD 2.7 MUSD 85.2 Oct./Nov. 2019
No. 3 MUSD 82.5 MUSD 2.7 MUSD 85.2 Dec. 2019
No. 4 MUSD 82.8 MUSD 2.7 MUSD 85.5 Dec. 2019
Option Contract amount Scrubber Tot. contract amount Delivery
No. 1 MUSD 82.8 MUSD 2.7 MUSD 85.5 Q2 2020
No. 2 MUSD 82.8 MUSD 2.7 MUSD 85.5 Q2 2020
No. 3 MUSD 82.8 MUSD 2.7 MUSD 85.5 Q2 2020
Expiry date for exercising the Options towards the Builder is 27 May 2018.
V.Ships Norway AS ("VShips") has assisted with the review of the Firm Vessels' specifications towards the Builder. The Company (or any nominee) will subsequently enter into a building supervision agreement for the building supervision of the Firm Vessels and, if applicable, the Optional Vessels.
It is a condition for Apollo's obligation to pay the first and subsequent instalments, under each of the Shipbuilding Contracts, that the Builder provides a refund guarantee issued by Export-Import Bank of Korea ("KEXIM") in favor of Apollo as security for the Builder's obligation under the Shipbuilding Contracts to refund the pre-delivery instalments paid by Apollo (together, the "Refund Guarantees"). As of the date hereof, KEXIM has not issued the Refund Guarantees (expected late April 2018). The first instalments (10% of the contract price under the corresponding Shipbuilding Contract) are payable within three (3) banking days following issuance of each of the Refund Guarantees (the Shipbuilding Contracts, the Option Agreement and the Refund Guarantees are hereinafter the referred to together as the "Transaction Agreements”).
The investors participating in the private placement of MNOK 172.5 will, prior to the annual general meeting in the Company to be held on 9 May 2018, pre-pay the subscription amount under the private placement to the Company, after which the Company will relend the pre-paid subscription amounts to Hunter Tankers AS, together with own existing corporate funds, in order for Hunter Tankers AS to fulfill its obligation to pay the first instalments under the Shipbuilding Contracts. The Company owns 100% of the issued shares in Hunter Tankers AS.
The Contract Transfer Agreement’s parties and structure
Pursuant to the Contract Transfer Agreement, Apollo acts as transferor and the Company acts as transferee, and the parties intend transaction contemplated by the Contract Transfer Agreement shall be undertaken in a three-step process as follows:
1. The Company (or its nominee) shall assume all rights and obligations of Apollo under the Transaction Agreements on a back-to-back basis to the effect that the Company (or its nominee) shall perform towards Apollo all obligations Apollo is obliged to perform under any of the Transaction Agreements and thereupon be entitled to the same rights and benefits from Apollo as Apollo is entitled to under the Transaction Agreements;
2. Subject to certain conditions being fulfilled, the Transaction Agreements shall be novated, transferred or assigned (as the case may be) from Apollo to the Company (or its nominee) so that the Company (or its nominee) replaces Apollo as party to or beneficiary of (as the case may be) the Transaction Agreements; and
3. In the event that the novation, transfer and assignment as aforesaid are not completed before delivery of the Vessels, the Company (or its nominee) shall become the registered owner of the Vessels upon delivery from the Builder.
Novation to Hunter Tankers AS
The Company intends to enter into a novation agreement (the “Novation Agreement”), with Apollo and the wholly owned subsidiary Hunter Tankers AS, whereby the Contract Transfer Agreement, save for the Company’s rights and obligations related to the Warrants (as defined below), shall be transferred and novated from the Company to Hunter Tankers AS, and shall constitute an agreement between Apollo and Hunter Tankers AS on the terms and subject to the conditions of the Contract Transfer Agreement. The Company will guarantee the obligations of Hunter Tankers AS towards Apollo under the Novation Agreement.
Execution and effectiveness of the Contract Transfer Agreement and the Novation Agreement is conditional upon the annual general meeting of the Company to be held on 9 May 2018: (i) approving the Contract Transfer Agreement and the Novation Agreement; (ii) approving the private placement of NOK 172.5 million, directed certain towards co-investors in the Shipbuilding Contracts, with a subscription price per share of NOK 2.30; and (iii) approving issuance of the Warrants. Execution of the Contract Transfer Agreement and the Novation Agreement is not subject to any regulatory approval.
Consideration to Apollo
In consideration of Apollo entering into the Contract Transfer Agreement, Apollo shall be entitled to subscribe for new shares in the Company as follows: (i) 5,000,000 shares at a subscription amount of NOK 2.60 per share (exercisable within 3 years from the date of issuance of the Warrants); (ii) 5,000,000 shares at a subscription amount of NOK 2.90 per share (exercisable within 4 years from the date of issuance of the Warrants); and (iii) 5,000,000 shares at a subscription amount of NOK 3.20 per share (exercisable within 5 years from the date of issuance of the Warrants), together, the "Warrants”. The Warrants shall be approved by the general meeting of the Company in accordance with the Norwegian Public Limited Liability Company Act 1997 section 11-12. The further details related to the Warrants are set out in the general meeting of the Company issuing the Warrants.
Other than the Warrants, Apollo will not receive any consideration for entering into the Contract Transfer Agreements.
Financing of the Shipbuilding Contracts and Vessels under the Option Agreement
The Company and Hunter Tankers AS intend to finance its obligations towards Apollo and the Builder by existing corporate funds and funds being available to the Company and Hunter Tankers AS (equity and external finance) at the time of settlement of the instalments under the Shipbuilding Contracts.
The Contract Transfer Agreement’s significance for Hunter Group
The Contract Transfer Agreement represents an important milestone for Hunter Group ASA under the new tanker strategy. Based on the terms of the Shipbuilding Contracts and Option Agreement, the Company will be set for growth, and both the Company and Apollo consequently believe the transfer will be an important step for the Company to create shareholder value, and in the best interest of the Company and its shareholders.
For further information, please contact:
Henrik A. Christensen
Chairman Hunter Group ASA
Cell phone +47 90 96 76 83
This stock exchange announcement is made pursuant to section 5-2 of the Norwegian Securities Trading Act, and prepared in accordance with the Continuing Obligations of the Oslo Stock Exchange section 3.4 (extended announcement).