Implications of Seafox's actions
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
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FOR IMMEDIATE RELEASE |
8 October 2020 |
Gulf Marine Services PLC
("GMS" or the "Company")
Implications of Seafox's actions on the Company's planned equity raise
Shareholder meeting to approve issue of warrants
Further to recent announcements that:
· Seafox International Limited ("Seafox") has requisitioned a general meeting to remove a ll of the non-executive directors of the Board and replace them with its nominees;
· the two Seafox directors appointed at the general meeting requisitioned by Seafox on 4 August 2020 have resigned; and
· Seafox has requisitioned a further general meeting to re-appoint one of those Seafox directors to the Board,
the Board of GMS is today providing an update on the implications of Seafox's actions on the planned equity raise.
Background
On 31 March 2020, the Company announced that it had reached agreement in principle with its consortium of lending banks (the "Lenders") on a new debt structure. The Board confirmed that it intended to seek shareholder approval to undertake a share capital increase before the end of 2020, with the aim of raising at least $75 million of net proceeds (the "Equity Raise").
On 9 June 2020, the Company entered into revised term debt facilities with its Lenders which provided GMS with access to working capital facilities, reprofiled debt repayments (including an extended final maturity date), and revised covenant tests to more sustainable levels (the "Debt Restructuring").
The Debt Restructuring provides a platform for the future success of the Company by giving the management team the time to fully implement its turnaround plan, including the delivery of lower operating costs and higher utilisation, through improved efficiencies, safe and reliable operations, and building strong customer and stakeholder relationships.
The terms of the Debt Restructuring include two conditions, at least one of which must be met before the end of 2020 to prevent the Company from triggering an event of default. The Company must either:
· raise at least US$75 million in net proceeds from the issuance of new equity and use the proceeds to pay down a portion of its debt by no later than 31 December 2020; or
· issue warrants to the Lenders by 31 December 2020 in an amount equal to 20 per cent. of the issued and outstanding shares of the Company (the "Warrants").
Following the announcement of the Debt Restructuring, the Board of GMS embarked on the extensive preparatory steps required to conduct a successful Equity Raise, including the appointment of a financial adviser (Evercore), corporate brokers (B of A Securities and Canaccord Genuity Limited), legal advisers (Linklaters LLP) and reporting accountants, the drafting of a Prospectus, and a process of preliminary engagement with its existing shareholders and potential new investors. Having received positive feedback from this process and the support of its corporate brokers, the Board was, prior to the recent actions of Seafox, confident about the potential to complete the Equity Raise before the end of 2020 even without equity contributions from Seafox, Mazrui International and Horizon Group.
Seafox's disruption of GMS's planned equity raise
Notwithstanding the importance of the Equity Raise to the Company's future prospects, Seafox, which is the Company's largest shareholder with 29.99% of its shares, has embarked on a sustained campaign to disrupt the governance and management of GMS. This has included:
· voting against the re-appointment of two non-executive directors and the Finance Director at the Annual General Meeting in 30 June 2020,
· the requisitioning of a general meeting to appoint two Seafox nominees to the Board which was held in 4 August 2020,
· the requisitioning of another general meeting to replace all of the non-executive directors with Seafox nominated directors on 18 September 2020;
· the resignation of the two Seafox directors on 7 October 2020; and
· the requisitioning of yet another general meeting on 7 October 2020 to re-appoint one of its nominated directors who had resigned only two hours earlier.
In order for the Equity Raise to be successful, the future governance of the Company needs to be clear, stable and attractive to potential investors.
As a result of the announcement of Seafox's proposed wholesale changes to the Board on 22 September 2020, the Company has not been able to meaningfully engage with potential investors, which is a critical preparatory step for the Equity Raise. In light of this and the absence of clarity over the Company's future governance, the only responsible action for the Company to take was to avoid the significant costs associated with further preparations for the Equity Raise, especially at a time of limited liquidity.
As a result of Seafox's actions, therefore, the Board concluded on 21 September 2020 that it had no option but to put the plans for the Equity Raise on hold.
Current situation
The Board has sought clarity from Seafox's (former) representatives on the Board as to Seafox's position on the Equity Raise. It has also sought clarity in writing from the Chairman of Mazrui International, Mr. Abdullah Mazrui, and the Chairman of Horizon Group, Mr. Rashid Al Suwaidi, who have previously voted in line with Seafox on governance resolutions at general meetings of the Company, as to their position. No such clarity has been received.
As a consequence, potential investors are unlikely to have visibility over the future governance of the Company before the resolution of the general meetings requisitioned by Seafox. Even afterwards, in view of the ongoing campaign of disruption undertaken by Seafox, it is unlikely to be sufficiently stable for the Equity Raise to be successful.
As a result, the Board believes, having taken advice from its financial adviser and having sought feedback from its corporate brokers, that it is currently impracticable to proceed with the Equity Raise and that, therefore, there is no reasonable prospect that the Equity Raise can be completed prior to the end of 2020.
Shareholder meeting to approve the issue of warrants
As noted in the Company's announcement on 30 July 2020, the Company received a letter dated 28 July 2020 from the Agent on behalf of the Lenders confirming that the Lenders "are not willing to renegotiate any of the terms of the Debt Restructuring and expect the Company to perform all of its obligations under the Common Terms Agreement. This position continues to hold regardless of the composition of the Company's Board or the appointment of new directors (emphasis added)".
Accordingly, at a meeting held on 7 October 2020, the Board of GMS unanimously approved the publication of a circular to seek shareholder approval to enable the Company to issue warrants to the Lenders by the end of 2020 so as to prevent the Company from triggering an event of default under its bank facilities.
The Circular to Shareholders and Notice of General Meeting will be published later today.
Risk of default and loss for shareholders
In the absence of the Equity Raise, and if the warrants are not issued, the Company will be in default under its bank facilities. If the Lenders enforce their rights, the Company could be put into administration and shareholders could lose the entire value of their investment.
Seafox's comments on the planned Equity Raise
The Board notes Seafox's comments that "the GMS Board decision, without the Seafox Nominee Directors [sic] presence or invitation, to abort the capital increase is alarming". Seafox's statement is both misleading and factually inaccurate. The Board placed the Equity Raise on hold on 21 September 2020, following receipt of Seafox's general meeting requisition, to seek further clarity from Seafox and other shareholders. The conclusion of the Board yesterday that there is no reasonable prospect that the Equity Raise can be completed prior to the end of 2020 was reached after the resignation of the Seafox directors. Had those directors not resigned from the Board, they would have had the opportunity to attend and participate in that debate. Instead, the actions of Seafox and its director appointees' only served to reinforce the concerns underlying the Board's conclusion about the Equity Raise.
The Board also notes that Seafox's suggestion that the Company should already have arranged some sort of unspecified firm underwriting of the Equity Raise, either from existing shareholders or third parties, demonstrates its lack of familiarity with the practicalities associated with raising equity for UK listed companies.
Whilst Seafox alleges that it is alarmed about the Board's decision to "abort the capital increase", the reality is Seafox itself has repeatedly indicated a lack of support for the Equity Raise, including a public statement to this effect on 4 May 2020. Further, Seafox's appointed directors did not vote in favour of continuing the preparation for the Equity Raise at a Board meeting held on 8 September 2020, notwithstanding the recommendation from Management and all of the Company's advisors. Seafox repeated its opposition to an Equity Raise in its letter to the Board on 18 September 2020.
The Board believes that Seafox's actions clearly demonstrate an intention to disrupt the governance of the Company, and have had the effect that the Equity Raise cannot be completed this year. These entirely self-serving actions will damage the value of the Company and risk putting it into default under its bank facilities. This supports the Board's view that Seafox continues to have a tactical plan to acquire the assets or equity of the Company at an undervaluation, as it has already attempted to do, twice, earlier this year.
The Circular and a Form of Proxy for voting at the General Meeting will be made available to shareholders electronically today and will also be made available to view on the Company's website, www.gmsuae.com . Mailing of the Circular and Form of Proxy to shareholders will also commence today.
In accordance with Listing Rule 9.6.1R, copies of these documents will be submitted to the UK Listing Authority via a National Storage Mechanism and will be available today to the public for inspection at https://www.fca.org.uk/markets/primary-markets/regulatorydisclosures/national-storage-mechanism .
Enquiries:
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GMS Tim Summers, Executive Chairman Stephen Kersley, Chief Financial Officer Tony Hunter, Company Secretary
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+44 (0) 207 603 1515
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Brunswick (PR Adviser to GMS) Patrick Handley - UK Will Medvei - UK Jade Mamarbachi - UAE
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+44 (0) 20 7404 5959 +971 (0) 50 600 3829
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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. The person responsible for arranging for the release of this announcement on behalf of GMS is Tony Hunter, Company Secretary. |
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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.
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