Reach Subsea takes action to remain competitiveCompany News // April 27, 2016
Reach Subsea has agreed a comprehensive restructuring of its charter agreements, which it says will enable it to move forward with market-based charter-in rates. As part of the restructuring, Solstad Offshore and Østensjø Rederi will become shareholders in Reach Subsea.
"Although the details of the agreement are confidential between the parties, we can convey that Reach Subsea will be well equipped to handle a prolonged period of weak market conditions," the company said. "A significant reduction in charter commitments will provide Reach with a competitive and flexible total cost base. Reach Subsea is now positioned to exploit opportunities in the market, and create shareholder value."
The immediate financial implications for Reach Subsea are:
• Reach’s total off-balance sheet bank guarantees of NKr 87 million will be cancelled
• Leasing debt will be reduced by NKr 26 million, and bank debt will increase by NKr 20 million
• As compensation, the total restricted cash deposits of NKr 53m will be released and paid out
• Reach will issue 15 million shares, subscribed at NKr 2 per share, to major shareholders, board members, key employees and the shipowners.
As a result total debt, including bank guarantees, and adjusted for restricted cash deposits, will be reduced from approximately NKr 140 million to approximately NKr 95 million. The company’s working capital and cash position is unaffected by the restructuring, and remains robust. In particular in light of the reduced and flexible cost base going forward.
The board will shortly summon an AGM and will as part of this propose the issuance of the new shares, all of which have been subscribed. 5 million shares will be issued to each of Solstad and Østensjø, while 5 million shares will be issued to major shareholders, board members and key employees. In addition, the board will propose that 4 million options with strike price NKr 3 per share are issued to Solstad Offshore.
Jostein Alendal, CEO of Reach Subsea, said: "We are pleased to have achieved a mutually acceptable solution that is adapted to the current market climate. This will enable Reach to continue working with shipowners known for quality and reliability. We are now equipped to face a prolonged period of poor markets, and will continue to deliver services of the highest quality.”