Renewable Energy Corporation ASA: EUR 300 million convertible Bond
REC ASA - Launching EUR 300 million convertible Bond
Sandvika, October 2, 2009, REC today announces that it intends to issue a EUR 300 million convertible bond (the "Bonds") to institutional investors, due in June 2014.
REC today announces that it intends to issue a EUR 300 million convertible bond, with an upsize option of EUR 50 million. The subordinated unsecured convertible bonds will be convertible into new ordinary shares of REC. The Bonds are expected to have a coupon of between 6.0 - 6.5 percent payable quarterly in arrear, commencing in January, 2010.
The conversion premium is expected to be between 30 - 35 percent over the volume weighted average price of REC's shares on the Oslo Stock Exchange from the time of launch until the time of pricing. The Bonds will be issued and redeemed at 100 percent of the principal amount, the maturity date is June 4, 2014. REC shall have the right to convert the Bonds into ordinary shares at any time on or after January 4, 2013, provided that the value of the underlying shares on the Oslo Stock Exchange (translated into EUR) on at least twenty trading days within a period of thirty consecutive trading days has exceeded 150 percent of the principal amount of the outstanding Bonds. The Bonds will not be listed initially, but REC may decide to list the Bonds at a later time.
The proceeds from the Bonds ensure further financial robustness and flexibility for the REC Group, and will be used for general corporate purposes. Final terms are expected to be determined and announced on or about October 2, 2009, and the Bonds are expected to be settled on or about October 13, 2009.
REC has received confirmation from its bank syndicates to the effect that the subordinated convertible bond loan will not be counted as debt under the gearing ratio covenants in REC existing loan agreements, and thus improves the capital structure.
Deutsche Bank AG has acted as co-ordinator in respect to the offering of the Bonds and REC has appointed BNP PARIBAS, BofA Merrill Lynch and Deutsche Bank AG as Joint Bookrunners and Joint Lead Managers. Commerzbank and Arctic Securities are appointed as Co-Managers.
In context of the convertible bond issue, REC wishes to make the following trading update (please refer to the second quarter report/presentation for more detailed guidance on the third quarter and full year 2009):
Regarding REC Silicon: Silicon III is currently undergoing commercial ramp-up and there is presently no change to the already communicated ramp-up schedule. REC has not made any formal adjustments to the already communicated production target, but reiterates that reaching the full year 2009 production targets remain challenging. The experience with the FBR technology to date remains positive and the potential of the process and the quality of the product have been confirmed.
Regarding REC Wafer: As previously reported, REC has been engaged in dialogue with its customers to assist them in coping with the effects of the market downturn. In most cases, REC and its customers have been able to find solutions for 2009 that are commercially acceptable for both parties. It is likely that the present weak market will continue in 2010, and it is therefore in RECs best interest to make additional contractual adjustments related to 2010. Such adjustments will have an adverse effect on EBITDA for the relevant period. During third quarter, and as previously communicated, REC Wafer has gradually increased the production capacity utilization.
Regarding REC Solar: Although the market has started to demand additional volumes of modules for delivery in the second half of 2009, prices still remain under pressure. REC Solar's sales prices for solar modules for the whole year of 2009 are on average expected to be down by approximately 35 percent compared to the average of 2008. In the second half of August, and as previously communicated, REC Solar has returned to full module production and cell production will be aligned to the internal need for solar cells.
Regarding Sovello: As previously communicated, Sovello was not in compliance with all its financial covenants at the end of 2008, and currently operates under a grace post the September-end waiver expiration date. REC expects that the current process of extending the waiver to the end of November will be successful, and will continue to work towards finding a longer-term financing solution together with the other owners of Sovello and the Sovello bank syndicate.
Regarding the Singapore Project: The project continues to trend towards a lower capital expenditure compared to the initial investment case, reflecting a less heated construction market. REC still expects the new plant to be more cost competitive than REC's existing facilities, and ramp-up is expected to start in the first half of 2010. REC is now preparing the operational organization for start of production, and the ramp-up is expected to be aligned to market demand and prudent working capital management.
On financing, REC successfully concluded its rights issue in July 2009. Subsequently, REC has also completed the issue of a 5-year fixed rate bond loan in the Norwegian bond market. The bond loan pays a fixed spread of 690 basis points, and has maturity on September 16, 2014. REC has also received a committed term sheet for a NOK 1,490 million term loan from Eksportfinans and is currently negotiating the loan agreement. The Board is on a continuous basis monitoring the capital structure and potential additional funding needs for the Company.
For more information, please contact:
Jon André Løkke, SVP and Investor Relations Officer, +47 907 44 949
REC is the leading vertically integrated player in the solar energy industry. REC Silicon and REC Wafer are among the world's largest producers of polysilicon and wafers for solar applications. REC Solar is a rapidly growing manufacturer of solar cells and modules, and are also engaging in project development activities in selected segments of the PV market. REC had revenues of NOK 8 191 million and an operating profit of NOK 2 529 million in 2008. Close to 3 000 employees work in REC's worldwide organization. Please also see www.recgroup.com.