Arrow Prospectus - PGS

ARROW SEISMIC ASA – INITIAL PUBLIC OFFERING
Payment terms
The contract price for each vessel is payable in instalments. Approximately 55 % of the contract price is payable
prior to delivery of the vessel. The instalments are secured by refund guarantees and the shipyard’s builder’s risk
insurance.
Transfer of rights and obligations
As mentioned above, most of the buyer’s functions under the ship building contract vest with the UK
subsidiaries. Thus it is ensured that ultimate acquirer of the vessel under the structure can supervise and oversee
the construction of the vessel. Among the rights vesting in the UK subsidiaries are the rights to approve work
and order variations. The UK subsidiaries do not have the right to take delivery of the vessel under the ship
building contracts. However, the Leasing Company’s acceptance of the vessel under the ship building contract is
contingent upon the UK subsidiary’s concurrent acceptance under the bareboat charter party. In addition, the
obligation to pay the instalments under the ship building contract remains with the Spanish leasing company.
The Charterer’s payment obligations arise out of the bareboat charter party and the appurtenant put and call
options as described below.
In case the structure collapses, for any reason, the transfer of rights and obligations agreement provides for a full
transfer of the ship building contract to the Charterer. However, upon a full transfer, for other reasons than the
Charterer’s breach, the purchase price to be paid under the ship building contract equals the remaining
instalments under the debt assumption and release agreement.
Bareboat charter party
Under the tax lease structure, each UK subsidiary has entered into a bareboat charter party with a Spanish
economic interest grouping (the” EIG”), which leases the vessel from the Leasing Company. The participants in
the EIG are jointly and severally liable for the EIG’s obligations. The tax lease arranger, or one of its
subsidiaries, will always own at least 1% of the EIG, thus guaranteeing its performance.
Although not on a standard form, the terms of the bareboat charter party reflect industry standards. The
Charterer’s main obligation under the bareboat charter party is to pay the charter hire and to comply with certain
undertakings regarding the management and employment of the vessels. In particular, the Charterer shall ensure
that the vessel is commercially and strategically managed from a country within the European Union and that it
flies the flag of an EU member state. Furthermore, the Charterer shall keep the vessel’s hull and machinery
adequately insured against marine and wars perils, as well as maintain a shipowner’s protection and indemnity
insurance. Breach of any of these obligations constitute a repudiation of the bareboat charter and entitles the EIG
and the Leasing Company to damages.
Put/ call options
The bareboat charter party contains a call option, whereby the Charterer may purchase the vessel upon expiry of
the charter period. In addition, the EIG has a put option, in case the Charterer should fail to declare the call
option. Furthermore, the since vessel is initially owned by the Leasing Company, the execution of the put and
call options between the Charterer and the EIG presupposes a transfer of ownership from the Leasing Company
to the EIG. In order to ensure that ownership to the vessel is ultimately transferred to the Charterer, there is also
a put and call option agreement in place between the Leasing Company and the Charterer.
Debt assumption and release agreement
Under the bareboat charter party and the put and call options, the Charterer has certain payment obligations. In
particular, the Charterer is obligated to pay the charter hire and the purchase price for the vessel. Through the
debt assumption and release agreement, the Charterer is discharged from these payment obligations, in
consideration of making payments to the SPV in accordance with a payment schedule corresponding to the
instalments commercially agreed with the ship yard. The debt assumption and release agreement discharges the
Charterer of all its payment obligations, save those arising out of the Charterer’s repudiatory breach of the
bareboat charter party or the transfer of rights and obligations agreement.
Refund guarantees
The payments made by the Charterer under the debt assumption agreement are secured by refund guarantees
issued by Banco Popular for the newbuildings 532, 533, and 535 and by Banco Pastor for the Newbuild 534.
The refund guarantees for Newbuilds 532 and 533 are limited to EUR 31,868,000 for each vessel. This means
that EUR 8,390,000 is not secured by the refund guarantee. The Company has found this acceptable, since the
vessel will be relatively close to completion at the point when the guarantee limit is exhausted. In addition, the
last instalments which exceeds the guarantee limit, relate particularly to seismic equipment which shall be
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