Deleveraging

With the assistance of ABG Sundal Collier Norge, Fairstar Heavy Transport this week successfully launched an underwritten equity issue of up to NOK 75 million, which will be used to retire the company’s secured bond issue.

The transaction structure combines a share capital increase in the form of a rights issue of up to 10 million new shares, with pre-emption rights for shareholders (i.e. approx. 0.3 new shares per ordinary share) at a subscription price of NOK 5.0 (“Tranche A”) and a share issue of up to 4,166,667 new shares directed towards the Bondholders of the Fairstar Heavy Transport Secured Bond Issue 2008/2009 (the “Bond Loan”) at a subscription price of NOK 6.0 (“Tranche B”) (collectively the “Offering”).

A syndicate of the Company’s current shareholders has underwritten 5.3 million new shares in Tranche A and a syndicate of the Company’s current Bondholders has underwritten 3.8 million new shares in Tranche B. NOK 51 million of the Offering is fully underwritten.

The proceeds from the Offering together with the cash flows generated from current contracts and the Company’s banking facilities, provide Fairstar with sufficient liquidity to redeem all of its outstanding Bonds no later than October 11, 2009, the Bond Loan redemption date.

Commenting on the transaction, Philip Adkins, CEO of Fairstar noted: “Capital markets today are extremely unstable. Access to liquidity is key to corporate survival. As long as there is reason to believe Fairstar will not be able to redeem its outstanding bond obligation it is extremely difficult to demonstrate to the market the true value of our Company…. By issuing equity and redeeming our outstanding bonds, Fairstar will be able to direct this future cash flow away from debt service and back to our shareholders, resulting in a more accurate valuation of our Company’s shares by the market.”

Even in times of crisis, valuation is not forgotten. Certainly, a sound balance sheet is a factor in that calculation.