Axactor SE – Strengthening the financial platform to improve shareholder returns and support further growth

Axactor SE (“Axactor” or the “Company”) today announces multiple steps to strengthen its financial platform in order to improve shareholder returns and support further growth. The initiatives will decrease the Company’s funding costs, increase its capacity for new investments in a highly attractive non-performing loans (“NPL”) market, simplify its corporate structure and increase financial transparency.

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As part of this plan, Axactor intends to raise NOK 534 million, equivalent to EUR 50 million, in new equity through a private placement and a subsequent offering, refinance its bonds and bank facilities, acquire 100% ownership of Axactor Invest 1 S.á r.l. (“Axactor Invest”) through acquisition of the 50% equity interest owned by Geveran Trading Co Ltd. and affiliates (“Geveran”) in exchange for new shares in Axactor (the “Axactor Invest Roll-up”) and refinance the Axactor Invest mezzanine facility.

The refinancing will secure improved terms and extended maturity on Axactor’s secured bank financing and address the upcoming bond maturity with early redemption of the AXA01 bond financed with a new bond issue. The refinancing also addresses the Axactor Invest structure well ahead of the maturity of its financing in 2022, securing better utilization of the combined bank facilities and extending the Axactor Invest mezzanine with maturity after the new bond maturity. The debt refinancing will result in all maturities being extended to 2024, ensuring a robust debt maturity schedule.

The Axactor Invest Roll-up is accretive to shareholders of Axactor and will simplify the corporate structure and increase financial transparency. Geveran, as the main shareholder, will continue as a strong backer of the Company in a public setting, with the Axactor Invest Roll-up further aligning Geveran’s equity exposure with the other shareholders of Axactor. Geveran will in total receive 50 million shares in Axactor as consideration at an issue price of NOK 8.00 per share and will as a result trigger a mandatory offer for the outstanding shares in Axactor.

The equity of Axactor will be strengthened by up to NOK 1,113 million, equivalent to EUR 105 million, with NOK 579 million, equivalent to EUR 55 million, contributed by the Axactor Invest Roll-up (including a gain realized by Axactor in the transaction) and new equity of up to NOK 534 million, equivalent to EUR 50 million, to be raised through a private placement and a subsequent offering. This will strengthen the balance sheet and secure capacity for future accretive portfolio purchases in a highly attractive NPL market, with a level of investment aimed at delivering attractive returns with a prudent risk profile.

The result of the initiatives taken is expected to substantially improve shareholder returns through the accretive contribution from the Axactor Invest Roll-up and improved financing terms, yielding a substantial uplift in ROE and EPS on a pro forma basis for 2019 and YTD Q3 2020. Further, the initiatives will allow for higher free cash flow, investment capacity and dividend potential going forward.

Equity issues – contemplated private placement and subsequent offering

An equity issue of NOK 320 million, equivalent to EUR 30 million, with a subscription price of NOK 8.00 per share is intended to be executed as a private placement. Reference is made to the separate stock exchange announcement with details of the contemplated private placement. Geveran has committed to subscribe for, and will be allocated, 12.7 million shares in the private placement, corresponding to its pro rata 31.95% share of the private placement. Completion of the private placement will be subject to (i) the relevant bodies of the Company passing the corporate resolutions required to consummate the Private Placement and allocate the Offer Shares, including approval by an extraordinary general meeting in the Company (the “EGM”) to be held 5 January 2021, (ii) approval by the EGM of the issuance of the Consideration Shares and (iii) approval of the early redemption of the AXA01 bond at a bondholder meeting and a minimum of EUR 160 million of subscriptions in the new bond issue. The Company intends to propose a subsequent offering of up to NOK 214 million, equivalent to EUR 20 million, with tradeable rights to existing shareholders who are not allocated shares in the private placement.

Bond refinancing

Axactor is proposing an amendment to the AXA01 bond terms to permit full early redemption of AXA01, to be refinanced with the issuance of a new EUR 160-200 million three-year senior unsecured bond (AXACTOR02).

Axactor proposes to amend the bond terms of AXA01 to include an issuer’s call option at 100.0% of par value, subject to (i) raising no less than NOK 320 million in new cash equity, (ii) the Axactor Invest Roll-up, (iii) obtaining a secured bank facility commitment of EUR 545 million with a three-years tenor (for the purpose of refinancing existing secured bank debt), (iv) issuance of a new unsecured bond (AXACTOR02) of minimum EUR 160 million for the purpose of refinancing AXA01, and (v) all AXA01 bondholders receiving an offer to exchange all or some of their AXA01 bonds for AXACTOR02 bonds at a price of 102.0% of par.

Axactor has received pre-commitments from bondholders representing 53.5% to vote in favor of the proposed amendments to AXA01. The bookbuilding of AXACTOR02 is expected to commence on 10 December, and Axactor has received substantial pre-commitments to subscribe for bonds at a preset margin of EURIBOR +700 bps. Bondholders holding AXA01 will receive guaranteed allocation in AXACTOR02 for the nominal amount tendered, including a fee of 2%, to be settled in cash including any accrued interest in AXA01 at the settlement date of AXACTOR02.

ABG Sundal Collier, Arctic Securities, DNB Markets (a part of DNB Bank ASA), Nordea Bank Abp, filial i Norge (the "Managers") have been mandated as Joint Lead Managers for the bond refinancing.

Bank refinancing

Axactor has secured a new three-year facility of EUR 620 million (of which EUR 545 million committed and EUR 75 million in an accordion option) with its existing banks, consolidating the current facilities in Axactor and Axactor Invest. The facility is refinanced at improved terms, with interest ratchet depending on LTV, with new terms improving bank financing cost with approximately 0.7%-points on a pro forma basis for YTD Q3 2020. Axactor has received credit approval for the new facility, subject to the completion of the Private Placement, and the bond and mezzanine refinancing.

The Axactor Invest Roll-up and mezzanine refinancing

Axactor will achieve 100% ownership of Axactor Invest through the acquisition of Geveran's 50% stake therein. Axactor and Geveran has agreed on a consideration of 50 million shares to be issued at a share price of NOK 8.00, corresponding to a value for the 50% stake of EUR 38 million.

ABG Sundal Collier has issued a fairness opinion to the Board of Directors of Axactor in respect of the valuation employed for the Axactor Invest stake concluding that the consideration is fair from a financial point of view to the shareholders of Axactor, and KPMG has issued an independent auditor report related to the Axactor Invest Roll-up.

Based on the consideration value of EUR 38 million, Axactor will realize a gain on the transaction directly in equity, which together with the issuance of the consideration shares, on a pro forma basis per Q3 2020 will result in an increase of shareholder’s equity of EUR 54.5 million, corresponding to the book value of the minority interest. Further, the consideration corresponds to a P/B of 0.69x based on the Q3 2020 equity, a P/E of 5.1x on 2019 earnings and 5.6x based on annualized Q3 2020 earnings for Axactor Invest, and is estimated to be acquired at an equivalent net IRR of approximately 13%.

The mezzanine financing of Axactor Invest will be refinanced at 650 bps, to be pari passu with AXACTOR02, with maturity 6 months after AXACTOR02, and being callable by the Company at par. Geveran, being the provider of the mezzanine financing, will receive a fee of between 0.5%-2.0% for the rollover, to be paid on completion and in increments up to a total of depending on the period up to refinancing.

The Axactor Invest Roll-up is subject to approval by the EGM to be held 5 January 2021.

The Axactor Invest Roll-up will increase Geveran’s ownership in Axactor from 31.95% to 46.41% (before the contemplated private placement and subsequent offering). Consequently, Geveran will, upon issuance of the consideration shares, trigger a mandatory offer obligation for Geveran for the shares in Axactor at an offer price of NOK 8.00 per share. Geveran has confirmed that it will put forward such mandatory offer within the required deadlines. As the completion of the transactions described herein will delivering substantial benefits to Axactor, the Board of Directors of Axactor does not expect to recommend shareholders to accept the mandatory offer from Geveran at NOK 8.00 per share.

Please find attached an investor presentation with a summary of the refinancing.

For additional information, please contact:

Johnny Tsolis, CEO, Axactor
Mobile phone: +47 913 35 461
Email: johnny.tsolis@axactor.com

Important Notices

This announcement is not and does not form a part of any offer to sell, or a solicitation of an offer to purchase, any securities of the Company. The distribution of this announcement and other information may be restricted by law in certain jurisdictions. Copies of this announcement are not being made and may not be distributed or sent into any jurisdiction in which such distribution would be unlawful or would require registration or other measures. Persons into whose possession this announcement or such other information should come are required to inform themselves about and to observe any such restrictions.

The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and accordingly may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and in accordance with applicable U.S. state securities laws. The Company does not intend to register any part of the offering or their securities in the United States or to conduct a public offering of securities in the United States. Any sale in the United States of the securities mentioned in this announcement will be made solely to "qualified institutional buyers" as defined in Rule 144A under the Securities Act.

In any member state of the EEA ("EEA Member State"), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Regulation, i.e., only to investors who can receive the offer without an approved prospectus in such EEA Member State. The expression "Prospectus Regulation" means Regulation 2017/1129 as amended together with any applicable implementing measures in any Member State.

This communication is only being distributed to and is only directed at persons in the United Kingdom that are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") or (ii) high net worth entities, and other persons to whom this announcement may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only for relevant persons and will be engaged in only with relevant persons. Persons distributing this communication must satisfy themselves that it is lawful to do so.

Matters discussed in this announcement may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "expect", "anticipate", "strategy", "intends", "estimate", "will", "may", "continue", "should" and similar expressions. The forward-looking statements in this announcement are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control.

Actual events may differ significantly from any anticipated development due to a number of factors, including without limitation, changes in investment levels and need for the Company’s services, changes in the general economic, political and market conditions in the markets in which the Company operate, the Company’s ability to attract, retain and motivate qualified personnel, changes in the Company’s ability to engage in commercially acceptable acquisitions and strategic investments, and changes in laws and regulation and the potential impact of legal proceedings and actions. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements. The Company does not provide any guarantees that the assumptions underlying the forward-looking statements in this announcement are free from errors nor does it accept any responsibility for the future accuracy of the opinions expressed in this announcement or any obligation to update or revise the statements in this announcement to reflect subsequent events. You should not place undue reliance on the forward-looking statements in this announcement.

The information, opinions and forward-looking statements contained in this announcement speak only as at its date and are subject to change without notice. The Company does not undertake any obligation to review, update, confirm, or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this announcement.

Neither of the Managers nor any of their respective affiliates makes any representation as to the accuracy or completeness of this announcement and none of them accepts any responsibility for the contents of this announcement or any matters referred to herein.

This announcement is for information purposes only and is not to be relied upon in substitution for the exercise of independent judgment. It is not intended as investment advice and under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy any securities or a recommendation to buy or sell any securities in the Company. Neither the Joint Bookrunners nor any of their respective affiliates accepts any liability arising from the use of this announcement.

This information is subject of the disclosure requirements of section 5-12 of the Norwegian Securities Trading Act.