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

Davie Yards Inc.

April 21, 2009 14:17 ET

Davie Yards Inc. Announces Proposed Private Placement

LEVIS, QUEBEC--(Marketwire - April 21, 2009) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Davie Yards Inc. ("Davie" or the "Corporation") (TSX:DAV) announced today that it has engaged Pareto Securities AS and Dundee Securities Corporation. to act as its financial advisor and agent in respect of a proposed private placement of US$20 million of common shares (the "Offering").

Pursuant to the terms of the Offering, Davie will issue a total of 244,000,005 common shares, representing approximately 196% of the Corporation's outstanding shares, at a price of approximately CDN$0.10 per share for aggregate consideration of US$20,000,000. The foregoing includes 49,788,200 shares to be issued to Offshore Holding AS ("Offshore"), 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. The issue price is at a greater discount to market than allowed under the rules of the Toronto Stock Exchange ("TSX") without shareholder approval.

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, amendments to existing construction contracts with Davie's clients to provide for aggregate price increases of US$95 million and revised delivery dates and payment schedules, and a US$20 million bridge loan from Export Development Canada ("EDC"). In addition, Davie has worked with EDC to secure $300 million of funding for its clients; of which $200 million will be used by Cecon ASA to finance the construction of the ships it presently has under contract with Davie. The completion of the Offering is a condition of EDC to the funding of the credit facilities to Cecon ASA. 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.

Davie Holding AS, a company controlled by Offshore, currently holds 89,600,000 common shares of the Corporation representing 71.9% of Davie's currently outstanding common shares. After giving effect to the Offering, Offshore will own 49,788,200 common shares directly, representing 13.5% of Davie's outstanding common shares, which, when combined with the shares held by Davie Holding AS, will represent 37.8% of Davie's outstanding common shares. In addition, funds or accounts managed by Wellington Management Company, LLP, which collectively own 8,610,000 common shares representing 6.9% of Davie's common shares, will acquire an additional 42,200,000 common shares pursuant to the Offering for a total of 50,810,000 common shares representing 13.8% of Davie's outstanding common shares after giving effect to the Offering. Cecon ASA, a client of Davie's that presently owns no shares of Davie will acquire 122,000,000 common shares pursuant to the Offering, representing 33.1% of Davie's outstanding common shares after giving effect to the Offering. Cecon will also be granted the right to nominate one person to Davie's board as long as it holds more than 15% of Davie's outstanding common shares. Offshore has also agreed with Cecon to vote its shares in favour of any such nominee.

Closing of the Offering is subject to several conditions including execution of the loan documents between Cecon and EDC, execution of definitive agreements customary for transactions of this nature and applicable regulatory approvals, including approval of the TSX.

A majority of directors of the Corporation, free from any interest in the Offering and unrelated to the parties involved in the Offering, has recommended proceeding with the Offering. Based on the recommendation of these directors, their belief that the Corporation is in serious financial difficulty due to inadequate liquidity resulting from withheld contract payments and their belief that the Offering together with the other elements of the financial restructuring, will considerably improve the Corporation's financial situation, the Board believes that the Offering is reasonable in the circumstances.

Under rules of the TSX, shareholder approval would have been required for the Offering since: (i) the number of common shares issuable exceeds 25% of the Corporation's currently outstanding common shares; (ii) the number of common shares issuable to insiders exceeds 10% of the Corporation's currently outstanding common shares; and (iii) the issue price of the common shares is lower than the market price less the maximum applicable discount. The Corporation is therefore applying to the TSX for an exemption from the requirement to seek shareholder approval, as required pursuant to Sections 607(e) and (g) of the TSX Company Manual, in accordance with Section 604(e) of the TSX Company Manual on the basis of the Corporation's financial hardship.

In addition, due to the participation of issuer insiders in the Offering, the Offering is a related party transaction for the purposes of Multilateral Instrument 61-101 and the Corporation is relying on exemptions from the formal valuation and minority approval requirements of Multilateral Instrument 61-101, including based on a determination of financial hardship. A material change report will be filed less than 21 days before the closing date of the Offering. This shorter period is reasonable and necessary in the circumstances as the Corporation wishes to complete the Offering in a timely manner.

This press release is not an offer to sell securities in the United States. The common shares have not been registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States in the absence of registration or an exemption from registration.

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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