New debt structure

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

FOR IMMEDIATE RELEASE

10 June 2020

 

Gulf Marine Services PLC

 

New debt structure provides GMS with secure platform to sustain recovery

 

Gulf Marine Services PLC ("GMS" or the "Company") announces that it and all of its banks (the "Banks") have executed an amendment for its common terms agreement and related loan documentation (the "Agreements") to restructure its debt facilities (the "Restructuring") which is consistent with the agreement in principle announced by the Company on 31 March 2020.

 

The Restructuring is designed to provide GMS with a sustainable capital structure which allows the Company to successfully execute its Business Plan and further deleverage the business through cash flow generation.  Specifically, this Restructuring comprises:

 

·      renewed existing term loan facilities totaling US$391 million with an extended maturity to 30 June 2025. The renewed facilities have a re-phased amortization profile, resulting in c. US$136 million reduction in fixed amortization payments through 2022. The cash interest margin is consistent with the prior facilities and is indexed to the net leverage of the Company;

·      enhanced liquidity through a new US$50 million working capital facility that will replace the existing working capital facilities. The term of this facility has also been extended to 30 June 2025;

·      increased financial covenant headroom that provides the Company with greater financial flexibility;

·      if the Company meets certain conditions subsequent, including raising at least US$75 million of net proceeds from an equity capital raise, then no additional interest will be payable by the Company and no equity linked instruments will be issued to the Banks. If these conditions are not met, then PIK interest and contingent warrants may be due to them (see Appendix A for further details).

 

The Company is appreciative of the Banks' ongoing support that enabled signing of the Agreements 3 weeks ahead of schedule. Closing of the Restructuring is subject to market standard conditions precedent.

 

With the new Agreements in place, the Company intends to seek shareholder approval to undertake a share capital increase before the end of 2020 (the "Capital Increase"). The Company is aiming to raise net proceeds of at least US$75 million to strengthen its balance sheet and avoid the issuance of warrants and incurrence of PIK interest noted above. The Company is encouraged by the expressions of support for this course of action that it has received from a broad group of shareholders. Further details of the Capital Increase will be announced in due course.

 

 

Tim Summers, Executive Chairman, said:

"GMS is moving from strength to strength. Today's announcement, ahead of schedule, of a revised debt structure, provides the platform for GMS to sustain its upward trajectory and take advantage of opportunities as oil and gas markets stabilize. Our organization is gaining in confidence, with substantial operational progress and material cost synergies delivered to date in 2020. We are now focused on rewarding the trust our shareholders have placed in the Board and management team."

 

Enquiries:

 

GMS Tim Summers, Executive Chairman Stephen Kersley, Chief Financial Officer Tony Hunter, Company Secretary		+44 (0) 207 603 1515
Evercore (Sole Financial Adviser to GMS) David Waring Edward Banks		+44 (0) 20 7653 6000
BofA Securities (Joint Corporate Broker to GMS) Thomas Milner Ben Winstanley		+44 (0) 20 7628 1000
Investec (Joint Corporate Broker to GMS) Chris Sim Henry Reast		+44 (0) 20 7597 5970
Brunswick (PR Adviser to GMS) Patrick Handley - UK Will Medvei - UK Jade Mamarbachi - UAE		+44 (0) 20 7404 5959  +971 (0) 50 600 3829

 

 

 

Appendix A: Contingent Warrants and PIK Interest Terms

 

·      As an incentive to reduce leverage under the Agreements, the Company has agreed that if by 31 December 2020, it has not successfully completed a Capital Increase of at least US$75 million (net) and made a prepayment of US$75 million in respect of the debt outstanding under the Agreements, it will be required to issue warrants to the Banks and pay additional interest on a PIK basis. The warrant issue will be subject to prior shareholder approval.

o  The warrants, if issued, will vest, subject to the exceptions noted below, in two equal tranches, with the first tranche vesting in 2022 and the second tranche vesting in 2023.

o  The warrants, if fully vested and exercised in full before their expiry in June 2025, could result in the Banks owning up to a 20% minority interest in the outstanding shares of GMS.

o  If, subsequent to the issuance of the warrants, the Company makes a prepayment of US$100 million in respect of the debt outstanding under the Agreements, any warrants that have not yet vested will be cancelled.

o  In addition, if the Company's senior leverage ratio (as calculated in accordance with the terms of the Common Terms Agreement) falls below 4:1, any warrants in issue which have not yet vested will be cancelled.

o  The PIK interest on the debt outstanding under the Agreements would be payable from 1 January 2021.

o  If, subsequent to 1 January 2021, the Company makes a prepayment of US$100 million in respect of the debt outstanding under the Agreements, the incurrence of PIK interest will cease.

o  In addition, if the Company's senior leverage ratio (as calculated in accordance with the terms of the Common Terms Agreement) falls below 4.0:1, the incurrence of PIK interest will also cease.

·      If the US$75 million prepayment referred to above is not made and the shareholder resolutions necessary to authorise the issuance of the warrants are not passed, in each case by 31 December 2020, the Banks would be entitled to call a default under the Agreements.

·      This would allow a majority of the Banks, representing at least 66.67% of total commitments, to exercise their rights to demand immediate repayment of the outstanding debt and/or to enforce their rights over the security granted by the Company as part of the Restructuring, either by enforcing security over assets and/or exercising the share pledge to take control of the business.

 

 

The person responsible for arranging for the release of this announcement on behalf of GMS is Tony Hunter, Company Secretary. 

FURTHER INFORMATION

 

Evercore Partners International LLP ("Evercore"), which is authorised and regulated by the Financial Conduct Authority in the UK, is acting exclusively as financial adviser to GMS and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than GMS for providing the protections afforded to clients of Evercore nor for providing advice in connection with the matters referred to herein.  Neither Evercore nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Evercore in connection with this announcement, any statement contained herein, any offer or otherwise.  Apart from the responsibilities and liabilities, if any, which may be imposed on Evercore by the Financial Services and Markets Act 2000, or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither Evercore nor any of its affiliates accepts any responsibility or liability whatsoever for the contents of this announcement, and no representation, express or implied, is made by it, or purported to be made on its behalf, in relation to the contents of this announcement, including its accuracy, completeness or verification of any other statement made or purported to be made by it, or on its behalf, in connection with GMS or the matters described in this document.  To the fullest extent permitted by applicable law, Evercore and its affiliates accordingly disclaim all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this announcement or any statement contained herein.

 

Merrill Lynch International ("BofA Securities"), which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting exclusively as corporate broker for GMS and for no one else and will not be responsible to anyone other than GMS for providing the protections afforded to its clients or for providing advice in relation to the matters referred to in this announcement. Neither BofA Securities, nor any of its affiliates, owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of BofA Securities in connection with this announcement, any statement contained herein or otherwise.

 

Investec Bank plc ("Investec"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for GMS and no one else in relation to the Transaction and/or other matters set out in this announcement and will not be responsible to anyone other than GMS for providing the protections afforded to the clients of Investec, or for providing advice in relation to this announcement, the contents of this announcement or any matter referred to herein. 

 

Neither Investec nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Investec in connection with this announcement, any statement contained herein or otherwise.

 

MAR

The information contained within this announcement is considered by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain.

ABOUT GMS

GMS, a company listed on the London Stock Exchange, was founded in Abu Dhabi in 1977 and has become a world-leading provider of advanced self-propelled self-elevating support vessels (SESVs).  The fleet serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and the United Kingdom.  The Group's assets are capable of serving clients' requirements across the globe, including those in the Middle East, South East Asia, West Africa, North America, the Gulf of Mexico and Europe.

The GMS fleet of 13 SESVs is amongst the youngest in the industry, with an average age of eight years. The vessels support GMS's clients in a broad range of offshore oil and gas platform refurbishment and maintenance activities, well intervention work and offshore wind turbine maintenance work (which are opex-led activities), as well as offshore oil and gas platform installation and decommissioning and offshore wind turbine installation (which are capex-led activities).

The SESVs are categorised by size - K-Class (Small), S-Class (Mid) and E-Class (Large) - with these capable of operating in water depths of 45m to 80m depending on leg length.  The vessels are four-legged and are self-propelled, which means they do not require tugs or similar support vessels for moves between locations in the field; this makes them significantly more cost-effective and time-efficient than conventional offshore support vessels without self-propulsion. They have a large deck space, crane capacity and accommodation facilities (for up to 300 people) that can be adapted to the requirements of the Group's clients.

The Company's Legal Entity Identifier is 213800IGS2QE89SAJF77.