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April 2, 2009

Golden Ocean placement raises $110 million

John Fredriksen's dry bulk shipping company Golden Ocean Group Limited (OSL:GOGL) looks to be on track with its restructuring plan. It says says that it has completed a placement of 180 million shares at a subscription price of NOK 4.10 per share. The gross proceeds from the placement will be approximately US $110 million. The placement was significantly over-subscribed.

After completion of the issue, the company will have 456,990,107 shares outstanding at a par value of USD 0.10 per share.

Hemen Holding Limited, a company indirectly controlled by John Fredriksen, had underwritten the equity issue and was allocated a total of 72 million shares in the placement. Hemen Holding's ownership interest remains basically unchanged after the issue equal to 40%.

Announcing the issue yesterday, the company said that the equity infusion combined with various agreements reached with yards and lenders, the existing book of long term charter out agreement and the modern fleet will create a solid financial fundament for future operation of Golden Ocean. The restructured balance sheet of GOGL should also put the company in a position where it can benefit from new opportunities in the dry-bulk market in the short to medium term.

The company has agreed with Hemen Holding to buy back Hemen Holding's USD 165 million position in the convertible bond at a price of 35 % of par. Similar offers have been given to four other significant remaining holders, but they have rejected this price. The buy back of the bonds will reduce the company's debt by USD 155 million and create a positive income of USD 96 million in Q2 2009.

As a precondition to the placement of the new shares, the company has succeeded in restructuring its order book with its shipyards. This restructuring involves a total of 9 vessels on order. The restructuring includes postponements of delivery dates, cancellations and the transfer of a number of vessels into a single purpose company which can be project financed. The consequence of the restructuring is that the financial commitment under the company's new building program is reduced by a total of approximately USD 350 million.

The company has also reached agreements with its lenders to alter the terms under its various syndicated loan agreements whereafter the Company will be allowed to draw on existing facilities. Changes agreed to existing covenants will also provide more flexibility going forward.

Apart from for three Kamsarmax newbuildings, all of which have 10 years time charters attached and one Capesize vessel to be delivered in 2012, the entire newbuilding program of the company now has secured required external financing.

Golden Ocean's open Capesize capacity for 2009/2010 is, on average, just in excess of 10%. For the Panamax segment, the open capacity is 40%.

The Board's target for the restructuring is that the company, with its current charter coverage, should generate positive cashflow after debt service and payment of newbuildings even if the average spot market rates for both segments should be as low as USD 15,000 and USD 7,500 per day which are lower than indicated by the current forward market. Under improved scenarios, it says, the company will generate substantial free cash.


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