Notes to the Consolidated Financial Statements
1 General information and financing
The consolidated financial statements of Polarcus Limited (the “Company”) and its subsidiaries (together the “Group”) for the period ended 31 December 2011 were authorized for issue in accordance with a resolution of the Board of Directors on 28 March 2012. Polarcus Limited is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer data acquisition from Pole to Pole. Polarcus Limited is incorporated in the Cayman Islands with its registered office at Walker House, 87 Mary Street, George Town, Grand Cayman, Cayman Islands. The Group has its main administration office in Dubai, United Arab Emirates which is the domicile of the Group. The Group has six high end 3D vessels, Polarcus Nadia, Polarcus Naila, Polarcus Asima, Polarcus Samur, Polarcus Alima and Vyacheslav Tikhonov that are currently operational. Shipbuilding contracts have been signed for a further two vessels, Polarcus Amani and Polarcus Adira, with delivery in the first half of 2012.
1.1 Financing
In October 2011 the Company entered into a loan facility of USD 410 million with DNB and DVB Bank SE, Nordic Branch, together with Garanti-instituttet for Eksportkreditt (GIEK) and Eksportfinans ASA (the “Fleet Bank Facility”). The Company also entered into an amended and restated bond agreement for the Polarcus Alima AS 10/15 12.5% USD 80 million second lien bond issue (ISIN: NO0010590300) (the “Bond Issue”) and entered into an inter-creditor agreement coordinating the security interests between the Fleet Bank Facility and the Bond Issue. The Fleet Bank Facility will be drawn down in 5 tranches and used to refinance existing debt related to Polarcus Alima, Polarcus Asima and Polarcus Samur and to partly finance the new buildings Polarcus Amani and Polarcus Adira. The drawing of the tranches will happen sequentially:
Tranche 1 and Tranche 2 were drawn on 15 November 2011. This triggered a repayment of the earlier USD 80 million loan facility and the USD 55 million bank loan facility granted by DVB Bank SE, Nordic Branch, together with GIEK and Eksportfinans ASA. Tranche 3 will be drawn upon delivery of Polarcus Amani expected to take place on 29 March 2012 and will be used to partly finance the vessel. Tranche 4 will be drawn upon delivery of Polarcus Adira expected to take place in Q2 2012 and will be used to partly finance the vessel. Tranche 5 will partly refinance the USD 55 million 13.0% Senior Secured Callable Bond (ISIN NO 0010445935), expected to take place in Q2/Q3 2012.
In respect of the drawdown of Tranche 3, Tranche 4 and Tranche 5 in the Fleet Bank Facility, a capital structure satisfactory to the leading banks is a condition precedent to drawdown. The new financing from Eksportfinans ASA included in the Fleet Bank Facility has a fixed interest rate of 2.85% in addition to 2.75% guarantee commission to GIEK and the commercial banks. When the Fleet Bank Facility is fully drawn, the average nominal interest rate for Polarcus will be approximately 7.5%. The new-build POLARCUS ADIRA has a total estimated project capital expenditure, based on a USDNOK exchange rate of 6.0, of USD 168 million; including seismic equipment but excluding capitalized interest costs. The project is slightly below budget, however some risk of a negative currency effect remains. A change of NOK 0.1 from NOK 6.0 in the USDNOK exchange rate will have a capital expenditure effect of approximately USD 2.0 million. On 11 October 2011 the Company issued 57,500,000 new shares through a private placement to Sabaro Investments Limited. The new shares were subscribed for at a price of NOK 4.00 per share. Total gross proceeds from the Private Placement amounts to NOK 230 million (USD 41.1 million). Following the Private Placement, the Company had 467,196,179 shares outstanding as of 31 December 2011 On 27 October 2011 the Company issued NOK 230 million unsecured bond with maturity in November 2014. The bonds were issued with a coupon of 14.00% p.a. On 14 March 2012 the Company issued 40,000,000 new shares through a private placement. The new shares were subscribed for at a price of NOK 5.80 per share. Total gross proceeds from the Private Placement amounts to NOK 232 million (USD 40.7 million). Following the Private Placement, the Company has 507,196,179 shares outstanding.
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