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Sevan Marine Sells Hulls 4 and 5 to Logitel Offshore

June 24, 2013 by  
Filed under Top Stories

Sevan Marine ASA announced that it has entered into an agreement to sell the semi-completed Sevan hulls number 4 and 5 on an “as-is, where-is” basis to Logitel Offshore.

The total purchase price for the Hulls is USD 41 million, to be rendered as a seller’s credit. Sevan will grant an additional loan of USD 10 million to be applied by Logitel Offshore towards its first milestone payment regarding hull number 4 to the yard which will complete the Hulls as high-end accommodation units (“FAUs”). The total USD 51 million credit is structured as a bullet loan, with a 3 per cent coupon, repayable within 24 – 36 months. The loan can be converted by Sevan into shares in Logitel Offshore. Upon sale of the Hulls, Sevan will be released from substantially all accrued, contingent and future liabilities related to the Hulls. The transaction remains subject to certain customary closing conditions.

Logitel Offshore is a stand-alone company established in cooperation with Sevan for the purpose of promoting floating accommodation units based on the Sevan design. Logitel Offshore has entered into agreements with a reputable yard for the construction of one plus one FAUs based on the Hulls, with options for two additional units. These agreements are non-recourse to Sevan. Work on hull number 4 is due to commence shortly, while work on hull number 5 is expected to commence before year end 2013, subject to certain initial milestone payments being made. While focusing on the core FPSO/FSO segment, Sevan has also been seeking to develop new markets for the Sevan design. As part hereof, Arne Smedal, co-founder of Sevan and vice chairperson of its Board of Directors, has established CeFront Technology AS (“CeFront”) in cooperation with Sevan. Sevan and CeFront have entered into a cooperation agreement regarding, among other things, the development of new applications and projects based on the Sevan design. Thus, Sevan has secured continued and preferential access to know-how and experience in addition to its own in-house resources, while retaining all patents and other intellectual property rights pertaining to the Sevan technology.

As a result of these two transactions, Sevan estimates that the operating expenses will be reduced with approximately USD 4.5 million per year. In connection with the organizational changes, a restructuring charge (including relevant severance benefits as per existing contracts) of approximately USD 3 million will be incurred in 2013.

Sale of the Hulls

The purchase price, USD 41 million in total, equals the book value of the Hulls as of 31 December 2012. An estimated total amount of USD 11 million in liabilities will be reversed through this transaction, leading to an estimated positive effect of USD 11 million in Sevan’s Q2 2013 numbers. In addition, the USD 20 million potential VAT and customs exposure in China stated in the Q4 2012 report in connection with the write-downs of the book value of the Hulls, is eliminated, together with potential liabilities going forward related to continuing maintenance, storage and insurance, including the costs and risks associated with moving the Hulls to a different storage area. The transaction is expected to be completed during Q2 2013.

Sevan will earn a license fee of USD 5 million for each of the Hulls, payable 6 months after commencement of any charter for the respective units. A license fee of USD 10 million has been agreed for any future FAU based on the Sevan design. Logitel Offshore will hold exclusive rights for the use of the Sevan design within the accommodation and logistics market for an initial period, with options to extend under certain conditions. Logitel Offshore will also enter into a service agreement with Sevan in connection with the construction of the FAUs to procure the necessary support from Sevan.

If Sevan elects to convert the USD 51 million loan into shares in Logitel Offshore, Sevan’s ownership interest following the conversion will be virtually 100% pre any equity issues. The final ownership share will depend on the amount of required new equity to be raised, subscription price, company development and access to long term debt. Logitel Offshore is currently reviewing various financing alternatives.

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