Premuda : Semiannual Report 2016

PREMUDA PRESS RELEASE:

SEMI ANNUAL FINANCIAL REPORT AS AT JUNE 30, 2016 APPROVED

Consolidated Group results: Loss €12.8m (1sthalf 2015: loss €39.9m) Equity €12.7m (1sthalf 2015: €67.4m)

The BOD of Premuda Spa has today approved First Half Financial Report at June 30, 2016 edited according to valuation and consolidation criteria unchanged from those adopted upon issuing the Annual Financial Statement at December 31, 2015.

The first Half 2016 result recorded a loss of about €12.8m, compared to loss of €39.9m of first Half 2015.

The period result was negatively affected by several factors, such as:

• the dry bulk freights levels, resulted significantly lower to the values, already negative, of the first half 2015 and the whole 2015, only partly mitigated by the commercial contracts defined in the past and still available;

• the Fleet reduction compared to the correspondent period of the past year due to dismissals finalized during the last part of 2015 and to m/v Four Springs lay-up throughout the whole first half;

• loss of revenues by the FPSO Four Rainbow, currently owned by the associate Anteros,in lay-up throughout the first half waiting for a new project of employment;

• the interest liabilities, still burdened by the high spreads applied on the last operations realized, waiting for a possible reduction within the terms of the indebtedness restructuring agreement;

• the overhead costs, still affected by the burdens of the restructuring indebtedness process, not yet completed.

  It is worth noting that the comparison with the corresponding period of the past financial year is unhomogeneous being the latter influenced by some negative non-recurring factors concerning particularly:

  • long off hires due to averages and shipyard works of three dry bulk units;

  • devaluations of three units planned to be sold to third parties in short time terms;

  • negative exchange rates differences (unrealized), concerning the realignment of the end-of-period exchange rates of US$ denominated loans, related to those Group companies posting their balance sheets in Euro.

Net of above factors, the loss of the first Half 2015 would have been €14.346m, anyhow higher than the corresponding value of €12.835m recorded in the first Half 2016.

Net of third party interest (non-significant) the net consolidated equity at June 30, 2016 is €12.7m (at June 30, 2015 was €67.4m and at December 31, 2015 was €27.3m), equal to € 0.067 per share (first Half 2015 € 0.36, 2015 year end € 0.146).

The Group financial situation reported here below shows net financial debts of €330.9m (respectively

€378.4m and €320.3m at the end of June and end of 2015), with cash-equivalents of €8.3m.

- cash	at 30/06/2016 63	at 31/12/2015 83	at 30/06/2015 71
- cash equivalents	8,234	24,829	19,181
Cash and cash equivalents	8,297	24,912	19,252
- current bank debt	(29,340)	(25,479)	(20,629)
- short-term portion of non-current bank debt	(307,162)	(316,944)	(374,305)
- other current financial debt	(2,702)	(2,756)	(2,681)
Current Financial debt	(339,204)	(345,179)	(397,615)
Net current financial position Non current financial debt Total net financial position	(330,907) - (330,907)	(320,267) - (320,267)	(378,363) - (378,363)

The net financial exposure at the end of the first Half 2016 rises by €10,6m compared to December 31, 2015 and reduces by €47,5m compared to June 30, 2015. The increase in respect of the 2015 year-end is mainly due to the operating losses and the period interest charges, partially compensated by the counter-valuation in Euro of the US$-denominated loans at period end exchange rates. The decrease compared to June 30, 2015 is mainly due to the dismissal finalized in the second half of the previous year.

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Integrative notes as requested by CONSOB on 17 July 2014 and 8 July 2016 pursuant to "Art. 114 comma 5 D. Lgs. No 58/98"

As per CONSOB request on 17 July 2014 in order to spread information pursuant to "art. 114 D. Lgs no. 58/98" of Italian Law (and integrated by the request of monthly information dated 8 July 2016), we here below inform that:

1. the Company and Group net financial position at June 30, 2016 shows respectively net indebtedness of €93,7m and €330,9m as per following tables:

   Financial Position at 30.06.2016 (€/000)	Premuda Spa	Premuda Group
   - cash	53	63
   - cash equivalent	2,832	8,234
   Cash and cash equivalents	2,885	8,297
   - current bank debt	(18,955)	(29,340)
   - short-term portion of non-current bank debt	(77,636)	(307,162)
   - other current financial debt	-	(2,702)
   Current financial debt	(96,591)	(339,204)
   Net current financial position	(93,706)	(330,907)
   Non current financial debt	-	-
   Net financial debt	(93,706)	(330,907)

   The financial indebtedness is for a long time entirely represented on short terms basis owing to the situation created with the suspension of payment of loans (capital quotas expiring June 30, 2013 and the relevant interests quotas starting from end December 2014), which constitutes breach of bank loans agreements that entitles each bank the right to claim the immediate repayment of the outstanding loans.However, negotiations with the banks are in place aimed at reaching an agreement to restructure the indebtedness for the entire Group (under Art. 67 of the Italian Bankruptcy Law). The agreement would imply new repayment plans, thus remediating the current default situation.

2. The Group is in default only towards the banks community and appears substantially solvent for the transactions of any other commercial entities, which are regularly paid-off at the expiring dates, with the usual margin of flexibility granted by the recurrent suppliers. There are no debts by the Company and by the Group expired at 30 June, 2016 towards employees and social security/tax entities. To be noted that records show only ordinary requests for payments by suppliers and that there are neither default notices nor actions by single creditors or by their categories to recovery own credits.

3. All transactions with related parties are summarized into following table:

   Trading with related parties:

   Generali Italia S.p.A. (shareholder ofInvestimenti

   30.06.2016

   Receivables Payables Costs Income

   Marittimi S.p.A., majority shareholders ofPremuda S.p.A.) 3,408 334 1,087 268

   Four Jolly S.p.A. - - - 151

   Herald Holding Ltd - 2,702 - -

   Anteros Rainbow Offshore Pte Ltd 432 - - 54

   Financing with related parties:

   Four Jolly S.p.A. 22 - - 44

   Herald Holding Ltd 62

   Anteros Rainbow Offshore Pte Ltd 19,600 - - -

4. Also in view of the formal default in fulfilling the refund obligations of financing installments expired as from June 30, 2013, many of the covenants and of negative pledges contained into the current financing contracts (many of which are audited on annual basis and some even semi-annually) are actually not complied with. Particularly, the non-compliance involves the "cross default" clauses, the value-to-loan ratio (provided for in all shipping mortgage deeds) and some financial parameters referred to a minimum net equity, to ratio between the operating result and the financial liabilities, and to ratio between financial indebtedness and EBITDA. The ongoing debts re-structuring agreement will need necessarily to provide for new covenants in line the current situation of reference.

5. It is to be noted that, in view of the extreme volatility of the referred shipping markets implying frequent fluctuations and deviations hardly explicable, the Company does not disclose to market its industrial plans developed and also the annual budgets and relevant adjustments are kept confidential.

   The plans developed with the aid of the independent advisor Venice Shipping Logistic S.p.A. (VSL) and repeatedly updated along with changed conditions of the market of reference, are not yet complied with, mainly because of a shipping market within the dry bulk sector resulted largely lower than expected. Also the estimates contained in the last financial proposal presented to the Banks in November 2015, did not materialize. Due to such a fact the fleet impairment test for 2015 Annual Report has been revised with more updated figures, which have been furtherly adjourned to issue the present report. Such estimates, basically confirming the previous ones, foresee a moderate upturn of the dry bulk sector earning capacity, starting from the second half of current financial year and consolidation of its values in the subsequent years, show firm returns within the tanker segment and will be reasonably utilized - in absence of events and circumstances unforeseeable - to set up the further (and hopefully final) financial proposal to be presented to the banks and to Pillarstoneupon re-start of negotiations at the end of the summer break.

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   Perspectives for 2016 - Significant events after half year closing

   After first half closing the assignment to Pillarstoneof receivables claimed by Unicredit, Carige and Gruppo Intesa towards the Premuda Group Companies has taken effect. Currently the procedures to transfer the related securities (mortgages, assignment of insurances, pledge on shares) are being conducted and at the end of the summer pause negotiations will be resumed (with Pillarstoneand the other financing banks) to finalize the whished debt restructuring agreement, essential requisite for the Company going concern. Considering the contraction of the net assets consequent to the freights market previously described, it is mandatory to complete this process rapidly, within the end of the current year.

   The chance that the above timeframe is not respected implies a significant uncertainty which might originate remarkable doubts about the capacity of Premuda Group to continue its operations as a going concern.

   Premuda Directors have however maintained their reasonable belief that the probabilities to reach an agreement with creditors are higher than those of failing negotiations (and the consequent scenario) and therefore issued the half year financial report based on ongoing concern basis.

   Among the factors contributing to lead to such opinion - partly already reported in the explanatory notes to the 2015 Annual Report - the following are highlighted:

   • the Group is in default only towards the banks community and appears substantially solvent for any other commercial transactions. There are therefore no initiative whatsoever from any single creditor or any group of;

   • the negotiations with the banks were never interrupted, in spite of the constant worsening of the conditions proposed to them in respect of the freights market trend (dry bulk);

   • none of the banks have initiated any executive actions, thus saving the commercial capacity of all Group Companies, supporting therefore the expectations that a restructuring deal can be reached;

   • the banks have always allowed Group-level financial management and have not opposed cash transfers among individual legal entities (typically executed by funding/repayment of loans) that make it possible to maintain sufficient liquidity in all companies;

• stand-still agreements signed in July 2015 have confirmed the interest and commitment by the banks to positively conclude negotiations. This intention is confirmed in practice by the attitude maintained by the banks on expiry of the agreements;

  • the extension of negotiating period due to the Pillarstonestep in, does not seem to have caused critical behavior by the other financing banks;

  • the expected conversion of part of "unsecured" debt, contained in the last proposal to the banks and reaffirmed by Pillarstone, contributes to reduce the risks connected to the net equity zeroing;

  • Pillarstone declared to maintain the ongoing concern, excluding that its intervention contemplates aims of liquidation;

  • the liquidation value would result today furtherly burdening the financing banks, particularly to the "unsecured" positions but also for some mortgage banks whose exposure is not, at the current market conditions, covered by an adequate value of the guaranteed asset (value which is directly influenced by freight rates), particularly referring to the dry bulkers owing to the weakness of the specific target market;

  • Pillarstone has provided (by means of an unbinding and conditioned draft of agreement, subscribed by Premuda and by the controlling partners Investimenti Marittimi and Navigazione Italiana) indications as to own intentions on the debt restructuring process of the Group and availability to provide new financial tools that might be necessary, even shortly, to sustain the Company reduced cash-flow.

    Considering:

    • the first half year results;

    • the trend of the markets of our interest in the first part of the third Quarter;

    • the commercial coverage already available,

it is reasonable to predict that, also setting aside serious unforeseen events and further needs for assets impairments which might occur according to markets trend, the final results for the second part of the year and of the whole 2016 Financial Year will be negative, a situation common to the majority of shipping companies operating in the dry bulk sector.

The consequent reduction of the net equity could again cause the occurrence of the provisions set forth by art. 2446/2447 Italian civil code. The BOD shall keep monitoring closely such a situation, to promptly provide the necessary measures.

The restoration of the Share Capital following its zeroing due to covering the period losses, is a case contemplated by the above mentioned draft of agreement with Pillarstone.

The summary tables of the Group financial position are attached for reference.