Havila Sets August Start for Ships After Escaping Russian Sanctions
Havila Kystruten reported that it has signed a terms sheet for the refinancing of the company setting the stage to bring to close more than a year of challenges brought on by the financial sanctions placed against Russian institutions. After multiple delays, the company expects to place its third and fourth cruise ships into service in August finally reaching full service on the Norwegian coastal route operating 12-day round trips from Bergen north to Kirkenes and back.
The cruise company found itself unwittingly caught in the sanctions because it had contracted to build its four ships that were being financed by GTLK, a well-known Russian financial firm. Their first ship was out of service for nearly two months in 2022 while they worked to find a solution and they were only able to take delivery of the second ship from Tersan after the shipyard agreed to a bridge loan. Delivery of the third and fourth ships have been posted so far in 2023 while Havila sought court approval in the UK and Ireland.
Havila explored several refinancing options and in June presented proposals to its shareholders. They originally selected a combination of selling approximately 60 million new shares to raise €65 million with existing shareholders including Havila Holding taking the lead in the equity raise. Reports indicated that investors were insisting on the equity increase before the broader refinancing.
Several plans emerged, with the company initially proposing to shareholders a €325 million bond issue. They said that management had considered various transactions and considering the need to secure finances for the delivery on the third and fourth vessels, the private placement in combination with the bond issue was chosen as “the alternative that best protects the company and the shareholders’ joint interest.”
Reports said the cost of the bond deal had risen to a total interest rate of 15 percent when an alternative was presented for the shareholders to refinance the company. At the shareholder meeting on June 27, Havila withdrew the bond deal saying that it had received an offer from an institutional investor for a private debt solution.
The terms sheet calls for a €305 million three-year facility. The interest rate is EURIBOR plus 6.00 percent and rises to plus 7.75 percent. It also includes 3.5 percent of PIK (payment in kind) and a guaranteed settlement by Havila Holding, the company’s largest shareholder, for a portion that amortizes in 15 months. The cost of the refinancing is steep but lower than originally contemplated with the company highlighting that its debt-to-equity ratio remains below 60 percent. The new capital is increased to €85 million under the new terms.
Final documentation still needs to be completed and the company had to petition the UK court for a second extension of the deadline for the settlement date. Once all the pieces fall into place, the agreement calls for the monies due GTLK to be placed into frozen accounts that can only be accessed when the financial sanctions are lifted.
Havila has now scheduled the maiden voyage of the Havila Pollux for August 12 and the Havila Polaris for August 17. The delivery of Polaris has been delayed since the end of 2022 with several previously scheduled dates to start service postponed while the legal complications and refinancing could be completed.
Two cruise companies, Havila and Swan Hellenic, both found themselves caught in the sanctions in 2022 due to agreements with GTLK. Swan Hellenic was able to acquire its second and third ships from the Helsinki shipyard after GTLK was declared in default while the company has had to go through a series of steps similar to Havila to exercise a purchase clause for its first cruise ship from GTLK.