The board of Louis Cruise Lines Ltd. (LCL) reached an agreement with Louis Tourist Agency Ltd. (LTA) for exchange of a percentage of shares held by the first in ROC Holdings Ltd. (ROCH), holding company of Royal Olympic Cruise Lines (ROCL), with a number of shares held by LTA in Cyprus Tourist Development Co. Ltd. (CTD), CTD being the owner of the Hilton Hotel in Nicosia.
The exchange in accordance with the relevant Share Exchange Agreement will be based on the investment cost as shown in the accounts of each company adjusted based on published results of CTD and ROCL from the date of their acquisition until the 30 November 2001, which is the date of effect of the Agreement. As a result of the exchange, LCL’s investment in ROCH will be replaced by participation of LCL in CTD by a percentage of 74.3% of the issued share capital of the latter.
The decision of the board to proceed with a Restructuring Plan was in view of the difficult situation that ROCL finds itself following events of the 11 September 2001 which have effected, and may continue to effect at least short-term, the financial status and prospects of ROCL. Whilst in 2000 ROCL managed to reverse its non-profit making trend of the past years and prospects for 2001 appeared positive, the unstable situation in Israel (which mainly effected the route of the new ship Olympic Voyager as well as arrivals of Americans in the Eastern Mediterranean) as well as the delayed delivery of the Olympia Explorer for technical reasons, substantially limited profits for 2001. Events of the 11 September led to a significant aggravation of the whole situation as net losses of profits due the events equaled US$ 12 million, whilst prospects for 2002 are uncertain at present.
By the restructuring, the following are sought:
(i) To avert the risks created by unstable elements on activities of ROCL and by the sensitivity of the market in which it operates.
(ii) The direct increase of profitability of LCL as it will not be effected by ROCL’s losses which may result in the future.
(iii) Increase of profitability of LCL through the contribution of anticipated profits of the Hilton Hotel.
(iv) Substantial improvement of balance sheets of LCL achieved by the deduction from its liabilities of ROCL’s substantial loans and by the addition to its assets of a substantial asset such as the luxurious Hilton Hotel, valued between CYP 40 to CYP 43.5 million by two independent professional valuers.
(v) The achievement of synergies between the Louis Hotels group, in which LCL holds 55% of the share capital, and the Hilton Hotel.
(vi) Reduction of LCL’s dependency on activities connected to a large degree with tourism, as the Hilton Hotel, being in the capital of Cyprus, is not effected to the same degree by seasonality and fluctuations of tourist numbers.
The company notes that:
(a) Synergies of Louis Cruise Lines and Royal Olympic Cruise Lines as far as purchasing, technical services, maintenance, insurance, supplies etc., will continue.
(b) By the exchange of shares, the balance sheet of Louis Cruise Lines will show radical changes. Based on the most recent accounts of ROCL as announced to the NASDAQ for the nine months ended 31 August 2001, borrowing of the LCL group will be reduced by CYP 143 million. The relation of loans to actual capital as at 31 December 2000, if restructuring had taken place with CTD as part of the group instead of ROCH, would be clearly improved by 0,33 times against 1,36 times based on the existing structure.
By the agreement reached, LTA will, in addition to taking up the investment of LCL in ROCH, guarantee the repayment of a loan equalling US$ 6 million which ROCL owes to LCL. Further, it acquires the convertible bond of US20 million plus interest which LCL gave to ROCL within 2001.
A particularly important aspect of the agreement concerns LCL’s right, over the next 12 months, for re-purchase of all shares held by LTA in ROCH, to a maximum number equalling those transferred by the said agreement. This ensures that LCL will benefit in the event where there are serious developments which would create new positive prospects for ROCL
LCL’s board believes that by the exchange agreement, an even more stable basis is created for the future development of LCL, which will give the company the opportunity to further establish its position as one of the largest groups of the tourist sector in Cyprus and the wider Eastern Mediterranean region. By the reduction of business risks and particularly the dependency on unstable elements and by strengthening its balances, additional opportunities are created for new strategic aims and cooperations, always aiming to maximize the benefits of its shareholders.
Implementation of the agreement is subject to approval by the Central Bank of Cyprus and by the other banks with which the company has agreements with.
By the restructuring within the framework of the said agreement, LTA substantially and practically supports Louis Cruise Lines once again.
The exchange in accordance with the relevant Share Exchange Agreement will be based on the investment cost as shown in the accounts of each company adjusted based on published results of CTD and ROCL from the date of their acquisition until the 30 November 2001, which is the date of effect of the Agreement. As a result of the exchange, LCL’s investment in ROCH will be replaced by participation of LCL in CTD by a percentage of 74.3% of the issued share capital of the latter.
The decision of the board to proceed with a Restructuring Plan was in view of the difficult situation that ROCL finds itself following events of the 11 September 2001 which have effected, and may continue to effect at least short-term, the financial status and prospects of ROCL. Whilst in 2000 ROCL managed to reverse its non-profit making trend of the past years and prospects for 2001 appeared positive, the unstable situation in Israel (which mainly effected the route of the new ship Olympic Voyager as well as arrivals of Americans in the Eastern Mediterranean) as well as the delayed delivery of the Olympia Explorer for technical reasons, substantially limited profits for 2001. Events of the 11 September led to a significant aggravation of the whole situation as net losses of profits due the events equaled US$ 12 million, whilst prospects for 2002 are uncertain at present.
By the restructuring, the following are sought:
(i) To avert the risks created by unstable elements on activities of ROCL and by the sensitivity of the market in which it operates.
(ii) The direct increase of profitability of LCL as it will not be effected by ROCL’s losses which may result in the future.
(iii) Increase of profitability of LCL through the contribution of anticipated profits of the Hilton Hotel.
(iv) Substantial improvement of balance sheets of LCL achieved by the deduction from its liabilities of ROCL’s substantial loans and by the addition to its assets of a substantial asset such as the luxurious Hilton Hotel, valued between CYP 40 to CYP 43.5 million by two independent professional valuers.
(v) The achievement of synergies between the Louis Hotels group, in which LCL holds 55% of the share capital, and the Hilton Hotel.
(vi) Reduction of LCL’s dependency on activities connected to a large degree with tourism, as the Hilton Hotel, being in the capital of Cyprus, is not effected to the same degree by seasonality and fluctuations of tourist numbers.
The company notes that:
(a) Synergies of Louis Cruise Lines and Royal Olympic Cruise Lines as far as purchasing, technical services, maintenance, insurance, supplies etc., will continue.
(b) By the exchange of shares, the balance sheet of Louis Cruise Lines will show radical changes. Based on the most recent accounts of ROCL as announced to the NASDAQ for the nine months ended 31 August 2001, borrowing of the LCL group will be reduced by CYP 143 million. The relation of loans to actual capital as at 31 December 2000, if restructuring had taken place with CTD as part of the group instead of ROCH, would be clearly improved by 0,33 times against 1,36 times based on the existing structure.
By the agreement reached, LTA will, in addition to taking up the investment of LCL in ROCH, guarantee the repayment of a loan equalling US$ 6 million which ROCL owes to LCL. Further, it acquires the convertible bond of US20 million plus interest which LCL gave to ROCL within 2001.
A particularly important aspect of the agreement concerns LCL’s right, over the next 12 months, for re-purchase of all shares held by LTA in ROCH, to a maximum number equalling those transferred by the said agreement. This ensures that LCL will benefit in the event where there are serious developments which would create new positive prospects for ROCL
LCL’s board believes that by the exchange agreement, an even more stable basis is created for the future development of LCL, which will give the company the opportunity to further establish its position as one of the largest groups of the tourist sector in Cyprus and the wider Eastern Mediterranean region. By the reduction of business risks and particularly the dependency on unstable elements and by strengthening its balances, additional opportunities are created for new strategic aims and cooperations, always aiming to maximize the benefits of its shareholders.
Implementation of the agreement is subject to approval by the Central Bank of Cyprus and by the other banks with which the company has agreements with.
By the restructuring within the framework of the said agreement, LTA substantially and practically supports Louis Cruise Lines once again.