Proposal for a restructuring plan

The board of directors of DOF ASA has decided to submit a proposal for a restructuring plan to the reconstructor and the DOF group's financial creditors and will prepare a notice convening an extraordinary general meeting to consider this proposal there will be no prospect that the company will be able to achieve a reconstruction and the court will probably open bankruptcy after a report from the reconstruction committee. The business will continue to operate as today through the subsidiary DOF Service AS and its underlying companies. However shareholder value will in all likelihood be lost. The restructuring proposal is based on the restructuring agreement that was negotiated between the company and the creditors and voted down at the extraordinary general meeting on 11 November 2022. A key point in the restructuring agreement is how much of the company the existing shareholders should retain after debt has been converted to equity. The original proposal would have meant that shareholders would own 4 percent of the shares in the company. After this proposal was voted down it was likely that the shareholders would end up with a 1 percent stake. The proposal that the board has now submitted means that the existing shareholders will own 3.75 per cent of the company's shares after debt conversion. The proposal is otherwise identical to the previous proposal. - The Board is submitting this proposal for reconstruction after careful consideration and extensive contact with creditors and shareholders. The Board of Directors believes that it would be impossible to obtain sufficient support among shareholders for a solution where they would only own 1 percent of the company after debt conversion. Similarly the Board believes that it would be impossible to achieve acceptance among the creditors for more than 3.75 percent to the existing shareholders says Leif Chr. Salomonsen Chairman of the Board of DOF ASA. The work of the new board At the Annual General Meeting on 14 December 2022 the shareholders of DOF ASA elected a new Board of Directors. The new Board of Directors noted that leading shareholders felt that they did not have sufficient information to take a position on the restructuring proposal presented. The new board therefore immediately started the work of obtaining an overview of relevant and updated information about the situation in the company including in particular valuations and assessments of liquidity and future cash flow. In parallel the board investigated whether it might be possible to obtain agreement with the financial creditors for any alternative solutions that could give shareholders a larger share of the company's assets and future value creation than the original proposal. In this period the board has had regular contact and meetings with representatives of the company's shareholders and the company's creditors and their advisers. The aim of these contacts and meetings has been to explore the possibility of other solutions including refinancing of the debt sale of ships and a share issuance. Unfortunately none of these solutions have been possible to realize. The way forward Based on preceding dialogue the Board considers that the current proposal is a reasonable compromise that should receive a sufficient majority among the company's creditors and shareholders. The company's main shareholder has confirmed support for the plan subject to the creditors' approval. In the coming days the Board will seek to obtain further pre-acceptances from shareholders. At the same time the company is preparing a more detailed statement of the company's results and cash flow in the fourth quarter and for the year 2022 as a whole and balance sheet values as of 31 December 2022. This information will be made available to the market prior to the Extraordinary General Meeting. No guaranteed solution While it is considered possible that the Board’s proposal will be able to obtain sufficient support from shareholders and creditors the Board stresses that there are no guarantees that the solution will be accepted. In the current situation of the company the company's financial creditors could at any time notify the reconstructor that they will not contribute to a solution such as the one proposed by the board. In that case the reconstructor will ask Hordaland District Court to suspend the restructuring process and open bankruptcy in DOF ASA. If the solution does not achieve a sufficient majority among the shareholders the result will be the same. It will then be up to Hordaland District Court to assess whether there are grounds for declaring DOF ASA bankrupt. Solvent or not The decisive factor for Hordaland District Court's conclusion will be whether based on inter alia the report from the reconstruction committee it is likely that DOF ASA will be able to achieve a restructuring. Whether the company is solvent or not is in principle not decisive. In the event that the court nevertheless decides to look further into the solvency issue it will consider whether the value of the assets of DOF ASA (i.e. shares in the subsidiary DOF Services AS) is worth more than the debt in DOF ASA as well as the liquidity. In practice this question will depend on whether the value of the assets of the DOF Group that can be realised in a bankruptcy is greater than the debt. Thus it is not the value of the assets of DOF as a going concern that is at issue. In order to shed light on this question the Board of Directors of DOF ASA has obtained and assessed independent valuations of the DOF Group's assets. The shipbrokers Fearnleys and Clarkson have assessed the value of the DOF Group's vessels. The advisory firm Deloitte has reviewed these and assessed them against the company's debt other liabilities and available liquid assets. Deloitte has also assessed the value of the DOF Group's other activities including the shares in DOFCON and the engineering services. The assessments now available are based on vessel values as of 31 December 2022. They show that vessel values in US dollars have increased since 31 September 2022. A weaker dollar has had the opposite effect removing much of the increase in value measured in NOK. However a weaker dollar also reduces the krone value of the company's debt. The final report from Deloitte is still pending. The Board of Directors has therefore not been able to reach a final conclusion as to whether the company will be considered insolvent but considers it probable. The Board's recommendation If the district court opens bankruptcy in DOF ASA the creditors will take over all assets in DOF ASA and the shareholders will lose everything. Even if Hordaland District Court does not open bankruptcy in DOF ASA the guarantee liability that DOF ASA has on behalf of its subsidiaries will remain. It is thus completely unlikely that the shareholders in any scenario could receive more value than the Board's proposed solution. Based on the above analyses and assessments it is the Board's clear opinion that the best solution for the company and for all of the company's stakeholders shareholders as well as creditors will be that the Board's proposal for reconstruction is implemented. - The Board would have liked to see the shareholders retain a larger share of the company than the reconstruction suggests. If it had been possible to turn back the clock and restart negotiations with the creditors today this might have been possible. However it is a fact that the DOF Group has approximately NOK 25 billion in debt on which for the most part neither interest nor instalments have been paid for more than two years says Salomonsen. - ""We are already in overtime and need a solution now. The company has been living at the mercy of its creditors for a long time. With the Board's proposal the existing shareholders will own 3.75% of a strengthened DOF ASA the company will continue its operations and the shareholders will participate in the value creation that many expect will take place in the time to come Salomonsen concludes. For further information please contact: Chairman DOF ASA: Leif Chr. Salomonsen tlf.: 992 42 888"