Neptune announces $80.6 million equity capital raising to...

Neptune announces $80.6 million equity capital raising to recapitalise its
balance sheet and set a platform for a turnaround in financial performance

 Neptune Marine Services Limited is seeking to raise up to approximately $80.6 million of new
equity at $0.06 per share
 The equity capital raising will fund the reduction of bank debt and deferred payments to
vendors
 The equity capital raising is necessary to ensure the ongoing financial viability of the Company
 The key terms of revised banking facilities have been agreed
 Significant management and board changes are being undertaken
 Broad‐reaching operational restructuring and cost saving initiatives are also underway
The Board of Neptune Marine Services Limited (ASX: NMS, Neptune or the Company) announces
that it will launch an equity capital raising to raise up to $80.6 million together with major, broad
reaching initiatives aimed at returning the business to profitability.

The equity capital raising will be a 3 for 1 pro‐rata entitlement offer of new shares in the Company, at
$0.06 per share to raise up to $80.6 million, to eligible shareholders (and an offer of any shortfall to
eligible shareholders and other investors) that will assist with the recapitalisation of the Neptune
balance sheet by reducing bank debt, settling deferred payments to vendors of acquired businesses
and providing working capital (Entitlement Offer). Shareholders will be able to apply for shares in
addition to their entitlement.
On 21 December 2010, the Company agreed revised banking facility terms with the National
Australia Bank (NAB). Further details with respect to the revised credit facilities are set out below.
In addition to the Entitlement Offer, the Board announced the following key elements of a
restructuring strategy at its AGM in Perth on 30 November 2010:
 Appointment of Robin King (currently Regional Vice President for Australia, New Zealand and
PNG) as acting CEO to replace the former CEO.
 Further strengthening of the Board via the appointment of at least two new non‐executive
directors with significant industry experience and associated skill sets.
 The engagement of PricewaterhouseCoopers (PwC) to assist management and the Board
with a thorough review of the business, current organisational efficiency, asset utilisation
and disposal options.
 Conduct a strategic review of the Company to identify, then sell or close underperforming
business units and assets.
 The commencement of an immediate and aggressive cost reduction program targeting
approximately $10 million in ongoing annual savings.
 In light of current developments, a review of the carrying value of goodwill as at 31
December 2010.
Trading in the Company?s shares will remain suspended pending completion of the Entitlement Offer.
The Entitlement Offer will be subject to shareholder approval at a general meeting to be held on or
about Thursday, 10 February 2011 (General Meeting), which is necessary to satisfy one of the
conditions of the ASX Listing Rule waivers granted to the Company by the Australian Securities
Exchange (ASX).
Neptune Chairman Ross Kennan said the immediate changes were necessary and would set a
platform for a return to profitability.
?The performance of our business over the last financial year and first and current quarter of 2011
has simply not been acceptable,? Mr Kennan said.
?The Board has taken decisive and wide‐reaching steps to turn around the Company?s performance
and to do so in the shortest possible timeframe.
?We require a recapitalised balance sheet in order to move forward and we understand that our
shareholders will want to see commitment to significant change before they commit further
investment.
?In our current situation, equity will have to be raised at a deep discount to the last market price and
therefore we believe it is fair and appropriate that we offer our existing shareholders the first
opportunity to invest at this discounted level.?
Mr Kennan said the Board was presenting the recapitalisation plan to shareholders and prospective
new investors on the basis of a comprehensive review of the Company?s finances and operations.
?We strongly believe Neptune can return to underlying profitability on the basis of the initiatives
being announced today,? he said.
?Shareholders have every right to be disappointed with Neptune?s recent performance, but we firmly
believe this plan can restore value for shareholders.?
Entitlement Offer
Neptune is seeking to raise a minimum of $60 million and a maximum of $80.6 million by way of a 3‐
for‐1 pro rata entitlement issue to existing shareholders at an issue price of $0.06 per share, with a
right to apply for shares in excess of entitlements to be satisfied out of any shortfall.
Patersons Securities Limited (Patersons) and Euroz Securities Limited (Euroz) have been appointed to
manage the Entitlement Offer (Joint Lead Managers) and place any shortfall on a best endeavours
basis. The obligations of the Joint Lead Managers are subject to a number of conditions precedent,
including the Company developing and implementing a business re‐structuring strategy to the
satisfaction of the Joint Lead Managers (acting reasonably).
Neptune?s directors will have the right to place any shortfall not taken up by shareholders with new
investors, which they will do in conjunction with the Joint Lead Managers. Once the minimum
subscription has been achieved, the Joint Lead Managers will have a further three months to place
the additional stock required to reach the maximum subscription.
The Entitlement Offer will be conducted pursuant to a prospectus under which existing eligible
shareholders will have the ability to apply for their entitlement, including additional shares in excess
of their entitlement (Prospectus). Neptune has some 12,000 shareholders who are eligible to
participate in the Entitlement Offer.
It is the Company?s present intention to apply the funds raised pursuant to the Entitlement Offer
towards:
 the reduction of bank debt;
 the settlement of all cash obligations which the Company currently owes to the vendors of
acquired businesses; and
 the costs of the issue, restructuring costs and for general working capital purposes.
Further specific details with respect to the use of funds raised pursuant to the Entitlement Offer will
be set out in the Prospectus.
Continuing Suspension
The Company?s shares will remain suspended from trading until the capital management initiatives
outlined in this announcement are completed as there is significant uncertainty with respect to the
completion of the Entitlement Offer. The Company?s ability to remain financially viable and meet its
obligations remains uncertain until the Entitlement Offer has been completed. The Directors
consider that if the Company does not remain in suspension throughout this period, the Entitlement
Offer would not be successful and the Company?s ability to remain financially viable will be uncertain.
Until the minimum subscription amount is received, Neptune is reliant on continued support from
the NAB to remain financially viable, together with the support from two vendors in relation to
deferred earn‐out payments. If the Entitlement Offer is not successful and the Company is unable to
source sufficient funds elsewhere, there is a real risk that the Company may default on its debt
obligations. In those circumstances, the Company?s lenders may wish to enforce their security over
the Company?s assets and sell those assets.
Timetable
An indicative timetable for the Entitlement Offer is attached to this announcement as Annexure A
(Timetable). The Company reserves the right to amend the Timetable without prior written notice.
The Timetable includes the date when it is expected that trading in the Company?s shares will be
reinstated.
The structure and timing of the Entitlement Offer is being conducted in accordance with waivers
granted by ASX to certain ASX Listing Rules and will be subject to shareholder approval at the General
Meeting. A notice convening the General Meeting will be dispatched to shareholders shortly.
Eligible shareholders will also receive a Prospectus for the Entitlement Offer in accordance with the
Timetable and should consider that document in deciding whether to acquire Neptune shares. Any
eligible shareholders wishing to acquire shares will need to complete the application form
accompanying the Prospectus. The Prospectus is expected to be lodged with ASX and ASIC in
accordance with the Timetable.
Revised banking facilities
The Company is pleased to announce that it secured revised bank facility terms for its facilities with
NAB on 21 December 2010. Amendments to the current facilities will be implemented with the
major changes to the existing facilities being as follows:
 extension of the maturity date for all NAB debt facilities until 31 March 2012;
 standstill on the principal loan amortisation and repayments until 28 February 2011;
 interest and fees to continue to accrue on all unpaid principal and owing repayments until
the date of actual repayment;
 the interest rate margin has increased from the current margin to 400 basis points above
bank?s indicator bill rates; and
 the waiver of financial covenants until 31 March 2012.
Additional information with respect to the Company?s revised banking facilities will be set out in the
Prospectus.
Agreements with Vendors
As announced by the Company on 17 August 2007 and 18 July 2008, the Company acquired Tri‐Surv
Pty Ltd and Access Management (WA) Pty Ltd. As announced at the time of these acquisitions, part
of the consideration for these acquisitions involved the Company agreeing to pay the vendors of the
respective businesses (Vendors) cash earn outs over a three year period (Vendor Payments). Part of
the Vendor Payments were required to be paid to the Vendors on 6 December 2010, however the
Company has entered into agreements with the Vendors extending the time for satisfaction of the
Vendor Payments until completion of the Entitlement Offer (Vendor Agreements).
The Vendor Agreements are conditional on the successful completion of the Entitlement Offer. The
Vendor Agreements require the Company to pay an amount of approximately $7.7 million to the
Vendors upon completion of the Entitlement Offer.
Additional information with respect to the Vendor Agreements will be set out in the Prospectus.
Management and Board Changes
The newly appointed acting Chief Executive Officer, Robin King, joined Neptune in September 2010
as Regional Vice President for Australia, New Zealand and PNG. Mr King is a highly experienced oil
and gas industry executive having most recently served as CEO of Technip Subsea 7 Asia Pacific (TS7).
A summary of Mr King?s CV is attached to this announcement as Annexure B.
Mr King said Neptune has a strong underlying business with a bright future.
?Based on my experience in the industry, I believe Neptune is a business that has the capacity to
deliver stronger financial performance and ultimately deliver value to shareholders,? he said.
?To restore value to investors, we need to recapitalise the balance sheet, accelerate the integration of
performing business units, and put in place a cost structure that supports financial performance.
?This will undoubtedly require changes to how Neptune operates and the senior management team
has a mandate from the Board to effect these changes.
?As a relative newcomer to Neptune, I bring a fresh set of eyes to this business and plan to make
whatever changes are necessary to improve our performance.
?I fully appreciate the gravity of the current situation and take the management of our shareholders?
funds very seriously.?
In implementing the turnaround program, Mr King will work closely with Chief Financial Officer,
David de Loub and Director, Strategy & Development, Rod Evans, both of whom assumed these roles
in July 2010. In addition, the Vendors will play integral role in the process.
In addition to the appointment of Mr King, the composition of the Board will be strengthened to
incorporate increased industry experience and appropriate skill sets to assist the Company
implement its new strategies.
Operational and Cost Saving Initiatives
Neptune will implement a major program to reduce costs and achieve operational efficiencies
throughout its business. The Board and management have already commenced a thorough review of
the business to achieve operational efficiencies, enhance asset utilisation and identify potential asset
disposals. As set out above, international accounting firm PwC have been engaged to assist with this
process.
As part of the review, the breadth of services offered in each region is being reviewed in detail and
the Company is fully prepared to scale back or cease operations if required.
Mr King said Neptune would not hesitate to take direct, decisive actions where appropriate.
?We will be hard‐nosed in our approach. That means we will get out of businesses or sell assets that
are not likely to deliver a satisfactory return to shareholders in the near term,? he said.
?At the same time, we see strong opportunities to drive revenue and earnings through a more
targeted and disciplined approached to growth.?
ENDS
Further information:
Investor Relations: Media Contact:
Rod Evans Shaun Duffy
Director, Strategy & Development FD
Neptune Marine Services Ltd Phone: (08) 9386 123
Phone: +61 8 9424 1111 Mobile: 0404 094 384
About Neptune
Neptune is one of Australia?s leading providers of engineered solutions to the international oil and gas, marine
and renewable energy industries. The company employs more than 650 people in Australia, the UK, USA, Asia
and the Middle East and provides a full suite of innovative services including DP construction support vessels;
subsea and pipeline engineering; offshore asset integrity management; ROV services; hydrographic surveying,
positioning and geophysical services; commercial diving; specialist fabrication; pipeline stabilisation and
grouting; NDT and inspection services; testing and assembly services; end to end project management; and the
patented NEPSYS? dry underwater welding technology. For more information visit www.neptunems.com
Annexure A ? Timetable
MILESTONE DATE
1. Dispatch notice of meeting to Shareholders Monday, 10 January 2011
2. Prospectus lodged with ASIC Wednesday, 19 January 2011
3. Notice sent to Shareholders Friday, 21 January 2011
4. ?Ex Date? Monday, 24 January 2011
5. Record Date 5pm (WST) Monday, 31 January 2011
6. Prospectus dispatched to Shareholders
Offer opens
Friday, 4 February 2011
7. General Meeting to approve Entitlement Offer Thursday, 10 February 2011
8. Closing date Thursday, 24 February 2011
9. Suspension ends Friday, 25 February 2011
10. Determine if Minimum Subscription Amount met Friday, 25 February 2011
11. ASX notified of under subscriptions Tuesday, 1 March 2011
12. Dispatch of holding statements for Entitlement Offer Friday, 4 March 2011
13. Shortfall Placement settled Friday, 24 May 2011
14. Last day to issue shares under the Shortfall Placement Friday, 24 May 2011
Annexure B
Robin King, Acting CEO, Neptune
Robin King has worked in the oil and gas industry since 1982, focussed mainly in the offshore and
subsea sectors. Prior to settling in Perth, Western Australia, Robin lived and worked in the UK,
Netherlands, Norway and South Africa.
Robin?s early career was spent in the UK with Brown and Root working on a range of subsea, pipeline
and construction projects offshore.
In 1986 Robin joined Allseas and relocated to the Netherlands in a management capacity.
Subsequently he coordinated the establishment of an office in South Africa and managed a project
that formed part of South Africa?s first offshore oil and gas project.
After completing a MBA in the early 1990?s, Robin joined Rockwater (now Subsea 7) in Scotland,
responsible for the company?s projects and subsea operations in the UK sector of the North Sea. He
subsequently relocated to Stavanger where he performed a similar role.
Prior to relocating to Australia in the late 1990?s, Robin returned to Scotland where he led an
?alliance? project involving Shell and five subsea and pipelay contractors.
In 1998 he joined Technip in Perth. During his 12 year career with Technip he held a variety of roles
including operational, business development, commercial and general management roles, with
responsibilities extending throughout Australia, South East Asia and India.
In 2006 he was appointed CEO for TS7 with responsibility for operations throughout Oceania and
South East Asia. TS7 was a new company formed jointly by Technip and Subsea 7 with offices in
Perth, Singapore and Kuala Lumpur. Robin remained there until joining Neptune in September 2010.