Davie Yards Inc.
TSX : DAV
TSX : DAV.WT

Davie Yards Inc.

May 05, 2009 15:14 ET

Davie Closes the First Tranche of Its US$20 Million Equity Raise and EDC Funds the First Advance of Its US$200 Million Loan to Cecon ASA

LEVIS, QUEBEC--(Marketwire - May 5, 2009) - Davie Yards Inc. ("Davie" or the "Corporation") (TSX:DAV) announced today that it has closed a first tranche of its previously announced US$20 million private placement of common shares. This allows Export Development Canada ("EDC") to release the first advance under the US$200 million loan to Davie's client Cecon ASA.

Davie issued a total of 202,567,585 common shares at a price of CDN$0.10 per share for aggregate consideration of approximately US$14.4 million. The foregoing includes 49,788,200 shares issued to Offshore Holding AS, the Corporation's indirect controlling shareholder, on conversion of a loan and accrued and unpaid interest in the amount of approximately US$4.1 million owed by the Corporation to Offshore Holding AS. The shares will be subject to a hold period of 4 months after the closing date. The proceeds of the private placement will be used for working capital requirements.

The private placement is part of a previously announced financial restructuring of the Corporation that included loans from Investissement Quebec in the aggregate amount of $12.7 million and amendments to existing construction contracts with Davie's clients for an aggregate price increases of US$95 million. Davie expects to close a second tranche of the private placement for proceeds of approximately US$6.6 million in the coming days.

In addition, Davie has, together with EDC, rearranged part of the US$300 million loan and guarantee scheme provided to Davie by the Government of Canada in December 2008. From this scheme Davie's client, Cecon ASA ("Cecon") has entered into a loan agreement for a US$200 million senior secured loan with EDC for the financing of the Cecon's three vessels under construction at Davie. The Loan will allow Cecon to draw up to US$200 million in construction financing prior to delivery of the vessels. By the closing of the private placement all conditions precedent to the loan have been satisfactorily met.

Pareto Securities AS and Dundee Securities Corporation acted as financial advisor and agent to the Corporation in connection with the Offering.

The completion of the Corporation's financial restructuring plan will also require the funding of a $100 million EDC facility to Ocean Hotels plc and the renegotiation of the Investissement Quebec loan facilities to pre-fund tax credits and employment obligations.

Under rules of the Toronto Stock exchange ("TSX") shareholder approval would have been required for the private placement due to the dilution, insider participation and issue price of the common shares. However, the Corporation relied on an exemption from the requirement to seek shareholder approval on the basis of its financial hardship. The TSX has advised the Corporation that reliance on this exemption will automatically result in a TSX de-listing review to confirm that the Corporation continues to meet TSX continued listing requirements. The Corporation believes the de-listing review is a routine procedure when using this exemption and currently complies with applicable TSX listing requirements and expects to continue to comply with such requirements following completion of the private placement and the other elements of it financial restructuring plan.

About Davie Yards Inc.

Davie Yards Inc. owns and operates the Davie yard in Quebec. With over 180 years of operating experience and approximately 1100 employees, the shipyard is the largest in Canada and among the largest and most sophisticated in North America. The Corporation has a focus on building large and complex offshore service vessels and rigs, and other sophisticated vessels for commercial and governmental use. Its shares are traded on the Toronto Stock Exchange (DAV). News and information are available at www.davie.ca.

Forward-Looking Statements

This news release contains forward-looking information within the meaning of applicable Canadian securities legislation. These statements include those relating to statements that are not historical facts, and reflect the current intentions, plans, expectations and beliefs of Davie's management ("Management"). Such forward-looking statements reflect Management's current beliefs and are based on information currently available to Management. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside Management's control. A number of factors could cause actual results of Davie to differ materially from the results predicted in the forward-looking statements, including, but not limited to, risks associated with the Corporation's fiscal results, conditions to the completion of the refinancing plan, working capital requirements, major disruptions of production, a downturn in economic conditions, competition and sensitivity to the oil and gas industry and other factors.

Although the forward-looking statements contained herein are based upon what Management believes to be reasonable assumptions, Management cannot assure investors that actual results will be consistent with these forward-looking statements. Certain assumptions underlying the forward-looking statements contained in this news release include Management's assumptions regarding market outlook for the construction of complex offshore vessels as well as the assumptions that new vessels will be delivered on schedule and that the Corporation will attract and retain key personnel in key positions. These forward-looking statements are made as of the date of this release, and Management assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. Readers are cautioned not to place undue reliance on these forward-looking statements. For additional information with respect to certain of these and other assumptions and risks, please refer to the Corporation's Management's Discussion and Analysis for the year ended December 31, 2008 as well as the Annual Financial Statements for the year ended December 31, 2008, and the Corporation's Annual Information Form dated March 29, 2009.

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