Hurtigruten Group secures refinancing and additional shareholder funding of EUR 80m

Last changed: Tuesday, February 21, 2023 10:27 PM

Hurtigruten Group AS (the “Company”, and together with its subsidiaries, the “Group”).

The Company is pleased to announce it has agreed terms in respect of two separate credit enhancing transactions:

1. Near-dated Refinancing: refinancing of the existing term loans maturing in June 2023
2. Long-term Maturity Extension: 2-year maturity extension of the existing EUR 740 million senior facilities supported by its largest lenders

These transactions provide significant additional capital, liquidity flexibility and capital structure runway to the Group. Key highlights include:

• To strengthen the Groups financial flexibility, the ultimate shareholders of the Group have agreed to provide an additional EUR 80 million of funding, including a EUR 25 million shareholder loan facility provided with immediate effect

• New 5-year debt facility of EUR 200 million (including warrant instrument), the proceeds of which will be applied towards refinancing the existing term loans maturing in June 2023 in full and general corporate purposes (the “New Debt Facility”)

• 2-year extension to the maturity of the existing EUR 85 million revolving credit facility (the “RCF”) to February 2026 and EUR 655 million term loan facility (the “TLB”) to February 2027 (the “Proposed SFA Amendments”)

• Including the shareholder loan facility provided today, the Group’s ultimate shareholders have provided EUR 60 million of shareholder loan facilities since November 2022, which upon completion of the Proposed SFA Amendments will be fully subordinated or equitised

Daniel Skjeldam, CEO of Hurtigruten Group, commented:

“These transactions we are announcing today will give us a solid financial position to take advantage of the current market opportunities. Over the last 6 weeks we have experienced a record-breaking period of future bookings which provides solid support for a strong financial recovery for the Company.”

“We appreciate the continuous strong support from our shareholders and financial stakeholders as we continue to develop Hurtigruten Group over the coming years”, adds Skjeldam.

New Debt Facility

The Group has received commitments from AlbaCore Capital Group for a new EUR 200 million 5-year facility, with all proceeds net of OID to be applied towards refinancing the EUR 176.5 million term loans maturing in June 2023 in full. The New Debt Facility is priced at E+600bps cash coupon and 600bps PIK coupon and will rank pari passu with the Group’s existing RCF and TLB under the senior facilities agreement originally dated 9 February 2018 (the “SFA”). In connection with the New Debt Facility, a synthetic warrant instrument will also be issued by Silk Topco A/S in respect of a small minority of its fully diluted equity for cash consideration of EUR 17.5 million (cash proceeds from which will be made available in full to the Group).

The availability of the New Debt Facility is not conditional upon completion of the Proposed SFA Amendments.

Proposed SFA Amendments

In addition to the maturity extension, the Group is proposing to make certain other amendments to the terms of the SFA. Under the Proposed SFA Amendments:

• maturities under the RCF and TLB will be extended from February 2024 and February 2025 to February 2026 and February 2027 respectively;
• margin under the TLB will be increased to 6.50% with additional 100bps annual margin step-ups from November 2024 (and in certain circumstances step-downs);
• margin under the RCF will be increased to 6.25% with additional 100bps annual margin step-ups from November 2024 (and in certain circumstances step-downs);
• the RCF, which is fully drawn, will be converted into a separate term loan;
• if the requisite consent of the RCF Lenders (defined below) is not obtained, the RCF commitments will be converted into additional TLB commitments in a single instrument with a combined maturity of February 2027 and terms consistent with the TLB;
• certain amendments to the covenant package will be implemented.

Trading Update

The Group continues to see operational and financial improvements in Hurtigruten Expeditions, Hurtigruten Norway and Hurtigruten Destinations and the positive booking trend is continuing.

YTD 2023, the Company has made a total of EUR 116 million in new sales which is up 93% vs. the same period last year and the highest booking volumes in the Company’s history.

As of 17th of February 2023, 1H bookings for Hurtigruten Group are at EUR 249 million which is 28% higher compared to the EUR 195 million same time last year for 1H 2022. For full year 2023 Hurtigruten Group currently has EUR 415 million in pre-booked revenue (excluding the EUR 67 million related to the contract revenue received from the Norwegian Government) which is approx. 56% of the expected revenue related to total pre-booked ticket sales for 2023.

We continue to implement the strategy of increasing yield across the business units, as of 17^th February 2023 the average yield for pre-booked 2023 sailings is at EUR 486 per passenger cruise night which is 4% higher compared to same time last year for 2022 sailings and 29% higher compared to same time 3 years ago for 2020 sailings.

Total revenues and other income in the fourth quarter of 2022 were EUR 135.5 million for Hurtigruten Group, an increase of 80% compared to the fourth quarter of 2021. Hurtigruten Norway and Hurtigruten Expeditions each had an occupancy of 57% which was slightly behind expectations driven by lower level of late sales and short-term cancellations.

Hurtigruten Group AS had in Q4 2022 a Normalised Adjusted EBITDA of positive EUR 0.5 million, including EUR 26 million of normalisation adjustments related primarily to i) above normal cancellations, ii) one-off marketing costs associated with the launch of the Svalbard Express and the North Cape Express product, and iii) cruise operating costs associated with vessels not in normal operations. Cash flow from operations was negative EUR 6 million, including positive EUR 22.9 million from movement in net working capital of which 6 million was related to positive effect from long term receivables associated with travel bonding.

In Q4 2022 the results were still influenced by operational challenges in Hurtigruten Expeditions driven by COVID restrictions related to i) closing of Dakar as a port resulting in the cancellation of the Bissagos season for MS Spitsbergen and ii) COVID testing regime on Antarctica sailings. From Q1 2023 all COVID testing requirements have been removed in Hurtigruten Expeditions.

Net Capital expenditure in Q4 2022 amounted to EUR 18 million with gross capex being EUR 29 million. The Group’s total capex expectations remain in line with previous guidance.

Cash flow from financing activities in Q4 2022 was positive EUR 27 million including EUR 40 million of shareholder loans provided in October and November 2022 and paid interest of EUR 8 million.

Pro forma for the transactions, available liquidity position as of end of January 2023 would be approx. EUR 100 million.

For further information, please contact:

Investor Relations team: [email protected]

Further details on the Proposed SFA Amendments

The Group has entered into a lock-up agreement (the “Lock-up Agreement”) with certain of the lenders under the Company’s SFA (the “Lenders” with a view to implementing the Proposed SFA Amendments. The Company intends to implement the Proposed SFA Amendments on a consensual basis with its Lenders.

Implementation of the Proposed SFA Amendments will be subject to conditions, including:

• customary legal and documentary conditions precedent;
• completion of the refinancing under the New Debt Facility;
• the subordination or equitisation of EUR 60 million of shareholder loan facilities advanced by the Company’s ultimate shareholders to the Group together with any other shareholder funding advanced prior to completion of the Proposed SFA Amendments and the advance by the Shareholders (on or before completion of the Proposed SFA Amendments) of such additional shareholder funding required to ensure that a total of EUR 115 million of shareholder funding is advanced to the Group in the period from November 2022 to completion of the Proposed SFA Amendments).

The Proposed SFA Amendments have the support of entities holding directly or indirectly over 48% of the total commitments under TLB. Additionally RCF Lenders representing 100% of the total commitments under the RCF are seeking credit committee approval to enter into the Lock-up Agreement, which would increase the aggregate percentage of supporting SFA commitments to 54%.

The key terms of the Lock-up Agreement include:

• payment of:
  • an early-bird fee of 50 bps (calculated as a percentage of a creditor’s outstanding principal amount of locked-up debt under the SFA as at a future record date) to all Lenders who are party to or accede to the Lock-up Agreement by 14 March 2023, or (in respect of Lenders which are constitutionally restricted from consenting or voting to approve the Proposed SFA Amendments), demonstrate their support for the Proposed SFA Amendments to the satisfaction of the Company by 14 March 2023; and

• • a lock-up fee of 50 bps (calculated as a percentage of a creditor’s outstanding principal amount of locked-up debt under the SFA as at a future record date) to all Lenders who are party to the Lock-up Agreement or (in respect of Lenders which are constitutionally restricted from consenting or voting to approve the Proposed SFA Amendments), demonstrate their support for the Proposed SFA Amendments to the satisfaction of the Company,

in each case, payable within 3 Business Days of completion of the Proposed SFA Amendments;

• the key provisions of the Lock-Up Agreement will become effective upon lenders representing 75% of the total commitments under the SFA (adjusted to take into account debt held by Lenders who are constitutionally restricted from taking active steps to consent or vote to approve the Proposed SFA Amendments but demonstrate their support to the Company’s satisfaction) acceding to the Lock-up Agreement, which the Group expects to occur in the coming weeks;

• the Lock-Up Agreement sets out key milestones in respect of the Proposed SFA Amendments. In the event that the Proposed SFA Amendments cannot be implemented on a fully consensual basis (in accordance with the terms under the SFA), the Company shall seek to implement the Proposed SFA Amendments through an English law scheme of arrangement under the Companies Act 2006;

• in the event that lenders representing 100% of the total commitments under the RCF do not consent to the Proposed SFA Amendments, the existing commitments under the RCF shall be converted into additional TLB commitments upon completion of the Proposed SFA Amendments and the RCF Lenders shall become TLB Lenders.

Any Lender, or sub-participant, which would like to become party to the Lock-up Agreement will need to sign an accession letter (“Accession Letter”) or sub-participant letter (“Sub-Participant Letter”) each in the form appended to the Lock-up Agreement.

The Company has engaged Kroll Issuer Services Limited (the “Information Agent”) who will be responsible for compiling the Accession Letters and Sub-Participant Letters. The Information Agent will provide any Lender which wishes to become party to the Lock-up Agreement with a word version of the Accession Letter or Sub-Participant Letter on request. The Company invites all Lenders who wish to access further information relating to the Proposed SFA Amendments, and including access to the Lock-Up Agreement, Accession Letters and Sub-Participant Letters to visit: https://deals.is.kroll.com/hurtigruten. For further information about the Lock-up Agreement, including accessions, please email:

Information Agent: [email protected]

About Hurtigruten Group

Hurtigruten Group is the world's leading adventure travel company, allowing guests to explore unique destinations in a sustainable and meaningful way.

With headquarters in Oslo, Norway and London, England and offices around the world, Hurtigruten Group has a proud expedition heritage and is committed to working with the best green technology to ensure our products are safe and respectful towards nature, wildlife, and the communities we visit.

Hurtigruten Group has a comprehensive portfolio encompassing three business areas: Hurtigruten Expeditions, which was founded in 1896, and is the world’s leading expedition cruise operator offering more than 250 destinations to more than 30 countries including Alaska, Antarctica, Arctic Canada and the Northwest Passage, the British Isles, the Caribbean, Galapagos Islands, Greenland, Iceland, Norway, South America, and West Africa. Hurtigruten Norway, which operates Norwegian Coastal Express, and is considered ‘the world’s most beautiful voyage’ has been sailing along the Norwegian coastline since 1893. Hurtigruten Svalbard, one of the most exclusive tour operators in the industry, offers land-based adventures on the spectacular Arctic archipelago.

https://global.hurtigruten.com/

Disclaimer

Forward-looking statements. This Trading Update may include “forward-looking statements.” These statements can be identified by the use of forward-looking terminology, including the terms “assumes,” “believes,” “estimates,” “anticipates,” “probability,” “risk,” “target,” “goal,” “objective,” “expects,” “intends,” “projects,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding the intentions, beliefs or current expectations of the Company concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which it operates, and include any business plan information included in this presentation. Any forward-looking statements which the Company make in this Trading Update speak only as of the date of such statement. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements. As a result, you should be cautious in placing any reliance on such statements and make your own judgment as to the likelihood of such statements materialising in the future and the reasonableness of any underlying assumptions. The Company does not intend, and undertakes no obligation, to revise the forward-looking statements included in this Presentation to reflect any future events or circumstances.

The Company has included non-IFRS financial measures in this Trading Update, which may not comply with the U.S. Securities and Exchange Commission rules governing the presentation of financial measures. These financial measures may not be comparable to those of other companies. Reference to these non-IFRS financial measures should be considered in addition to IFRS financial measures, but should not be considered a substitute for results that are presented in accordance with IFRS.