Polarcus launches equity private placement NOT

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, HONG KONG OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL OR WOULD REQUIRE REGISTRATION OR OTHER MEASURES. THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER OF ANY OF THE SECURITIES DESCRIBED HEREIN.

Polarcus Limited ("Polarcus" or the "Company") (OSE: PLCS) proposes to issue shares with gross proceeds of approximately NOK 330 million (approximately USD 40 million) through a private placement (the "Private Placement").

The Private Placement is intended to strengthen the Company's liquidity position in response to a prolonged industry downturn impacting the seismic services segment. The proposed transaction leverages the contingencies that were incorporated in the restructuring completed by the Company in February 2016.

Polarcus has completed negotiations with the lenders in the Fleet Bank Facility (as defined below) to an extension of the amortization freeze to 1 January 2019, reducing installments in 2018 by approximately USD 30 million. The amortization freeze triggers a one-year extension of the reduced operating lease rates for Polarcus Nadia and Polarcus Naila until 1 January 2019, reducing the lease payment in 2018 by approximately USD 15 million. This will also extend the term of the two leases by one year to Q4 2022. Polarcus has also concluded negotiations with DNB Bank ASA to extend its USD 25 million working capital facility (the "WCF") by 1 year to 1 July 2019 which further improves the Company's financial flexibility.

Rod Starr, CEO of Polarcus, commented: "The Private Placement will be supplemented by a significant reduction in debt service which together improve the Company's liquidity by approximately USD 80 million through the end of 2018. This gives Polarcus a financial foundation to continue our focus on operational excellence, cost efficiency and backlog for the fleet."

PRIVATE PLACEMENT

ABG Sundal Collier ASA (the "Manager") has been retained to advise on and effect the Private Placement.

The subscription price and the number of new shares to be issued  will be set through a book-building process. The minimum order in the Private Placement has been set at NOK 1.0 million. The application period will commence at 16:30 CET on 9 February 2017 and close on 10 February 2017 at 08.00 CET. The board of directors of the Company (the "Board") may, however, at any time resolve to close or extend the application period at its own discretion.

The Private Placement will be directed towards Norwegian and international investors, in each case subject to and in compliance with applicable exemptions from relevant prospectus and registration requirements.

Current shareholders and pre-sounded investors will be given preference in the allocation. The final allocation will be made at the Board's sole discretion. The Company will announce the result of the Private Placement through a stock exchange notice expected to be published before opening of trading on the Oslo Stock Exchange tomorrow, 10 February 2017. Conditional notification of allotment and payment instructions will be sent to applicants on or about 10 February 2017.

Completion of the Private Placement is conditional upon:

(i)        relevant credit committee or board approvals (as applicable) by the bank financing parties (the "Finance Parties") of certain amendments to the existing USD 410 million fleet bank facility agreement between, among others, the Company, DNB Bank ASA, DVB Bank SE, Nordic Branch, Garanti-instituttet for Eksportkreditt (GIEK), Eksportkreditt Norge AS and Eksportfinans ASA (the "Fleet Bank Facility"). The amendments include:

                   a.     no amortization until 1 January 2019;

                   b.     extension of the existing cash sweep until 1 January 2019;

                   c.     the Debt Service Ratio ("DSR") covenant being maximum 1.25x for 2017 and 2018, 2.0x for 2019 onwards and the proceeds from the Private Placement and the Subsequent Offering  being counted as EBITDA for the purpose of calculating the DSR;

                   d.     the Minimum Equity Ratio being reduced from 25% to 20% and multi-client assets being included in the calculation of the equity ratio; and

                   e.     enhanced security including USD 6 million deposit into a retention account for future installments.

(ii)        credit committee approval from DNB Bank ASA being obtained to extend the USD 25 million working capital facility (the "WCF") by 1 year to 1 July 2019;

(iii)        the bondholders of the NOK denominated "FRN Polarcus Limited Senior Unsecured Callable Bond Issue 2014/2019" as amended with ISINs NO 0010714389 and NO0010757255 and tickers PLCS03 and PLCS03-B (the "NOK Denominated Bond") and the USD denominated "8 per cent Polarcus Limited Senior Unsecured Callable Bond Issue 2013/2018" as amended with ISINs NO0010680150 and NO0010757248 and tickers PLCS02 and PLCS02-B (the "USD Denominated Bond") (together the "Unsecured Bonds") approving an amendment to the Minimum Equity Ratio covenant mirroring the Fleet Bank Facility; and

(iv)        approvals by ordinary resolution at an Extraordinary General Meeting of the Company (the "EGM") being obtained to increase the authorized share capital of the Company and to issue shares in the Company in respect of the proposed equity issues.

The EGM of the Company referred to above is expected to be held on or about 6 March 2017. Subject to satisfaction of the conditions for completion, the new shares are expected to be delivered two business days after the EGM. The shares issued in the Private Placement will be registered under a separate ISIN number, being KYG7153K1572, pending listing of the shares on Oslo Børs. The new shares will not be tradable on Oslo Børs until the listing prospectus has been approved and made public, following which the shares will be transferred to the Company's ordinary ISIN and be automatically listed and tradable on Oslo Børs. A listing on Merkur Market will be sought for the interim period between delivery and listing on Oslo Børs.

In respect of the required approvals under the Unsecured Bonds, the bondholders meetings are expected to be held on or about 27 February 2017.

The Company has already received support from larger shareholders and bondholders to vote in favor of the transaction at the EGM and at the bondholders' meeting, respectively.

SUBSEQUENT OFFERING

The Board proposes to conduct a subsequent offering of up to NOK 40 million at the same price per Share as the Private Placement to existing shareholders in the Company as of the end of trading on 9 February 2017, as registered in the VPS as of the end of 13 February 2017, allocating a preference to such existing shareholders who did not participate in the Private Placement and who are not resident in a jurisdiction where such offering would be unlawful or, for jurisdictions other than Norway, would require any prospectus, filing, registration or similar action (the "Subsequent Offering"). Non-tradable subscription rights will be awarded. The existing Shares in the Company will trade exclusive of the right to participate in the Subsequent Offering from and including 10 February 2017. Such Subsequent Offering is subject to shareholders at an EGM voting in favor of an ordinary resolution to increase the authorized share capital required to conduct the Private Placement and the Subsequent Offering and issue the necessary shares. The Board reserves the right, at its absolute discretion, to cancel the subsequent offering at any time.

FINANCIAL UPDATE

Polarcus estimates Q4 2016 consolidated revenues of approximately USD 47 million. The estimated, preliminary Q4 2016 EBITDA is approximately negative USD 3 million. The Q4 EBIT is estimated to be approximately negative USD 35 million. The free cash at the end of Q4 2016 was USD 39 million (including the undrawn USD 25m working capital facility). The Q4 2016 statements contained in this announcement are only a preliminary assessment and exclude any impairments and the full accounting impact of any onerous contracts. Management's preliminary assessment indicates non-cash impairment charges and an additional non-cash onerous contract provision mainly related to the operating lease commitment for the laid-up vessel Polarcus Nadia.  The total of these non-cash items is approximately USD 50 million. The Company has not completed all review and control procedures relating to its financial reporting and the financial statements contained in this announcement are unaudited. The estimates provided in this release are therefore subject to change and final results may deviate materially from the information herein.

With the expected EBITDA level for Q4 2016, the Company would have been in breach of the DSR covenant in the Fleet Bank Facility as of 31 December 2016. The Company received a reset for the Q4 2016 DSR covenant (the "Waiver") before the end of Q4 2016 and was in compliance with all covenants as of 31 December 2016. 

The Company is currently investigating together with its auditor whether strict interpretation of IAS 1.69 requires the Fleet Bank Facility to be temporarily reclassified as a current liability in the Company's Q4 2016 financial statements due to the view that the Company, based on wording included with the Waiver, did not have an unconditional right to defer payment for 12 months as at 31 December 2016. Regardless of the outcome of this discussion with the Company's auditor, the Fleet Bank Facility debt is expected to be booked as a non-current liability from Q1 2017 financial statements onwards.

Subject to the completion of the Private Placement and approval by the Finance Parties of the amendments to the Fleet Bank Facility, the DSR covenant will be reset going forward as described above. If the conditions of the Private Placement are not fulfilled, the DSR covenant is 2.0x from Q1 2017 onwards and the Company will then likely breach the DSR covenant as of Q1 2017. 

The Company will be releasing its Fourth Quarter 2016 Report on 21 February 2017.

Contacts

Rod Starr, CEO +971 4 436 0800 rod.starr@polarcus.com

Hans-Peter Burlid, CFO +971 50 559 8175 hp.burlid@polarcus.com

About Polarcus

Polarcus (OSE: PLCS) is an innovative marine geophysical company with a pioneering environmental agenda, delivering high-end towed streamer data acquisition and imaging services from Pole to Pole. Polarcus operates a fleet of high performance 3D seismic vessels incorporating leading-edge maritime technologies for improved safety and efficiency. Polarcus offers contract seismic surveys and multi-client projects with advanced onboard processing solutions and employs nearly 500 professionals worldwide. The Company's principal office is in Dubai, United Arab Emirates. For more information, visit  www.polarcus.com

Disclaimer

The information included herein may contain forward-looking statements. Forward- looking statements include all statements that are not historical facts, including but not limited to statements expressing or implying the Company's intent, belief or current expectations with respect to, among other things, forecasts, estimates, and predictions. Such forward-looking statements necessarily involve risks and uncertainties and are dependent on assumptions, information, data or methods that may be incorrect or imprecise. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations proves to be inaccurate or is unrealized. Some factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, developments in the oil and gas industry, the demand for seismic services, the demand for data from the Company's multi-client library, currency risks, political risks, regulatory risks, and unexpected operational setbacks. For a further description of other relevant risk factors we refer to our 2015 Annual Report. The reservation is also made that inaccuracies or mistakes may occur in the information given above concerning the current status of the Company or its business. Any reliance on the information given above is at the risk of the reader, and Polarcus disclaims any and all liability in this respect.

This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.