REC ASA - Launching EUR 300 million convertible Bond

Sandvika, October 2, 2009, REC today announces that it intends to issue a EUR 300 million convertible bond (the "Bonds") to institutional investors, due in June 2014.   REC today announces that it intends to issue a EUR 300 million convertible bond, with an upsize option of EUR 50 million. The subordinated unsecured convertible bonds will be convertible into new ordinary shares of REC. The Bonds are expected to have a coupon of between 6.0 - 6.5 percent payable quarterly in arrear, commenc (...)
Sandvika, October 2, 2009, REC today announces that it intends to issue a EUR 300 million convertible bond (the "Bonds") to institutional investors, due in June 2014.
 
REC today announces that it intends to issue a EUR 300 million convertible bond, with an upsize option of EUR 50 million. The subordinated unsecured convertible bonds will be convertible into new ordinary shares of REC. The Bonds are expected to have a coupon of between 6.0 - 6.5 percent payable quarterly in arrear, commencing in January, 2010.
 
The conversion premium is expected to be between 30 - 35 percent over the volume weighted average price of REC's shares on the Oslo Stock Exchange from the time of launch until the time of pricing. The Bonds will be issued and redeemed at 100 percent of the principal amount, the maturity date is June 4, 2014. REC shall have the right to convert the Bonds into ordinary shares at any time on or after January 4, 2013, provided that the value of the underlying shares on the Oslo Stock Exchange (translated into EUR) on at least twenty trading days within a period of thirty consecutive trading days has exceeded 150 percent of the principal amount of the outstanding Bonds. The Bonds will not be listed initially, but REC may decide to list the Bonds at a later time.
 
The proceeds from the Bonds ensure further financial robustness and flexibility for the REC Group, and will be used for general corporate purposes. Final terms are expected to be determined and announced on or about October 2, 2009, and the Bonds are expected to be settled on or about October 13, 2009.
 
REC has received confirmation from its bank syndicates to the effect that the subordinated convertible bond loan will not be counted as debt under the gearing ratio covenants in REC existing loan agreements, and thus improves the capital structure.
 
Deutsche Bank AG has acted as co-ordinator in respect to the offering of the Bonds and REC has appointed BNP PARIBAS, BofA Merrill Lynch and Deutsche Bank AG as Joint Bookrunners and Joint Lead Managers. Commerzbank and Arctic Securities are appointed as Co-Managers.
 
In context of the convertible bond issue, REC wishes to make the following trading update (please refer to the second quarter report/presentation for more detailed guidance on the third quarter and full year 2009):
 
Regarding REC Silicon: Silicon III is currently undergoing commercial ramp-up and there is presently no change to the already communicated ramp-up schedule. REC has not made any formal adjustments to the already communicated production target, but reiterates that reaching the full year 2009 production targets remain challenging. The experience with the FBR technology to date remains positive and the potential of the process and the quality of the product have been confirmed.
 
Regarding REC Wafer: As previously reported, REC has been engaged in dialogue with its customers to assist them in coping with the effects of the market downturn. In most cases, REC and its customers have been able to find solutions for 2009 that are commercially acceptable for both parties. It is likely that the present weak market will continue in 2010, and it is therefore in RECs best interest to make additional contractual adjustments related to 2010. Such adjustments will have an adverse effect on EBITDA for the relevant period. During third quarter, and as previously communicated, REC Wafer has gradually increased the production capacity utilization.
 
Regarding REC Solar: Although the market has started to demand additional volumes of modules for delivery in the second half of 2009, prices still remain under pressure. REC Solar's sales prices for solar modules for the whole year of 2009 are on average expected to be down by approximately 35 percent compared to the average of 2008. In the second half of August, and as previously communicated, REC Solar has returned to full module production and cell production will be aligned to the internal need for solar cells.
 
Regarding Sovello: As previously communicated, Sovello was not in compliance with all its financial covenants at the end of 2008, and currently operates under a grace post the September-end waiver expiration date. REC expects that the current process of extending the waiver to the end of November will be successful, and will continue to work towards finding a longer-term financing solution together with the other owners of Sovello and the Sovello bank syndicate.
 
Regarding the Singapore Project: The project continues to trend towards a lower capital expenditure compared to the initial investment case, reflecting a less heated construction market. REC still expects the new plant to be more cost competitive than REC's existing facilities, and ramp-up is expected to start in the first half of 2010. REC is now preparing the operational organization for start of production, and the ramp-up is expected to be aligned to market demand and prudent working capital management.
 
On financing, REC successfully concluded its rights issue in July 2009. Subsequently, REC has also completed the issue of a 5-year fixed rate bond loan in the Norwegian bond market. The bond loan pays a fixed spread of 690 basis points, and has maturity on September 16, 2014. REC has also received a committed term sheet for a NOK 1,490 million term loan from Eksportfinans and is currently negotiating the loan agreement. The Board is on a continuous basis monitoring the capital structure and potential additional funding needs for the Company.
 
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART DIRECTLY OR INDIRECTLY, IN AUSTRALIA, CANADA, HONG KONG, SOUTH AFRICA, JAPAN OR THE UNITED STATES:
 
Certain statements contained herein that are not statements of historical fact, may constitute forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results or events concerning the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Although REC has attempted to identify important factors that could cause actual events or results to differ from those described in forward-looking statements contained herein, there can be no assurance that the forward-looking statements will prove to be accurate as actual future events could differ materially from those anticipated in such statements. Except as may be required by applicable law or stock exchange regulation, REC undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
 
This press release is for information purposes only and does not constitute or form part of, and should not be construed as an offer or an invitation to sell or issue, or the solicitation of any offer to buy or subscribe for, any securities.  In connection with this transaction there has not been, nor will there be, any public offering of the Bonds. No prospectus will be prepared in connection with the offering of the Bonds. The Bonds may not be offered to the public in any jurisdiction in circumstances which would require REC to prepare or register any prospectus or offering document relating to the Bonds in such jurisdiction. The distribution of this press release and the offer and sale of the Bonds in certain jurisdictions may be restricted by law. Any persons reading this press release should inform themselves of and observe any such restrictions.
 
This press release does not constitute an offer to sell or a solicitation of an offer to purchase any securities in the United States.  The securities referred to herein (including the Bonds and the shares of REC) have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or the laws of any state within the U.S., and may not be offered or sold in the United States, except in a transaction not subject to, or pursuant to an applicable exemption from, the registration requirements of the Securities Act or any state securities laws. This press release and the information contained herein may not be distributed or sent into the United States, or in any other jurisdiction in which offers or sales of the securities described herein would be prohibited by applicable laws and should not be distributed to United States persons or publications with a general circulation in the United States. No offering of the Bonds is being made in the United States.
 
This press release is only being distributed to and is only directed at (i) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") and (ii) high net worth entities falling within Article 49(2) of the Order and (iii) persons to whom it would otherwise be lawful to distribute it (all such persons together being referred to as "relevant persons").  The Bonds are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Bonds will be engaged in only with, relevant persons.  Any person who is not a relevant person should not act or rely on this press release or any of its contents.
 
Stabilization/FSA
 
For more information, please contact:
Jon André Løkke, SVP and Investor Relations Officer, +47 907 44 949
 
About REC
REC is the leading vertically integrated player in the solar energy industry. REC Silicon and REC Wafer are among the world's largest producers of polysilicon and wafers for solar applications. REC Solar is a rapidly growing manufacturer of solar cells and modules, and are also engaging in project development activities in selected segments of the PV market. REC had revenues of NOK 8 191 million and an operating profit of NOK 2 529 million in 2008. Close to 3 000 employees work in REC's worldwide organization. Please also see www.recgroup.com.