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The Agreement does not become effective until the Investor deposits in escrow an amount of USD 2,500,000 plus all reasonably incurred legal fees and expenses and the parties enter into an escrow agreement. In the event that the funds are not deposited or the escrow agreement is not entered into within 20 trading days, the Agreement dissolves immediately. In addition, the Agreement will automatically terminate upon the occurrence of certain events set forth in the Agreement. Mr. Ion G. Varouxakis, Chairman, President and Chief Executive Officer of the Company made the following comments: “After a prolonged period of tortured uncertainty, we are particularly pleased to enter into this Agreement, which will remove approximately USD 30 million of secured debt from our books. In conjunction with action taken since the beginning of the year, the majority of our trade debt and a third of our bank debt will have been exchanged for equity upon completion of this Agreement. This development shall, we hope, accelerate our discussions with our other Lenders for a similar realistic relief and a continued support of our efforts. Most importantly, under the extremely adverse circumstances we have been facing, we firmly believe this development is optimal for our shareholders for whom we are striving to extract maximum value; it also is the least onerous for our lending partners.” Mr. Varouxakis added: “We would like to thank Deutsche Bank for their frank cooperation and realistic vision, our remaining banking partners, as well as our numerous trade and business partners who have provided us with their invaluable support and their dedicated patience throughout this long period.” Mr. Alexandros Mylonas, Chief Financial Officer of the Company, added: “Since the beginning of the year we have already swapped USD 4.8 million of trade debt into equity. This time, the significance of this transaction on our balance sheet is substantial. Upon completion of this Agreement, our total bank debt is expected to be reduced from approximately USD 89.2 million on December 31, 2012 to USD 59.7 million, two of our vessels will be debt free, and USD 1 million in interest charges are expected to be reduced per year. We also expect to post significant one-off gains from the USD 19.5 million debt forgiveness. Based upon our improved balance sheet after this transaction, we intend to seek funding for additional working capital in order to weather the adverse conditions still present in our indu stry.” Mr. Joshua Sason, Founder and Chief Executive Officer of Magna Group, noted: “We approach this transaction and the work we’ve done with the management of FreeSeas with great pride, and view the agreement with Deutsche Bank as a significant milestone in the restructuring and advancement of the company. The expected material reduction in debt, release of two vessels from mortgage encumbrance upon full payment of the settlement amount and annual interest expense savings should enable FreeSeas to be in a substantially stronger business position.” About FreeSeas Inc. FreeSeas Inc. is a Marshall Islands corporation with principal offices in Athens, Greece. FreeSeas is engaged in the transportation of drybulk cargoes through the ownership and operation of drybulk carriers. Currently, it has a fleet of Handysize and Handy max vessels. FreeSeas' common stock trades on the NASDAQ Capital Market under the symbol FREE. Risks and uncertainties are described in reports filed by FreeSeas Inc. with the U.S. Securities and Exchange Commission, which can be obtained free of charge on the SEC's website at http://www.sec.gov. For more information about FreeSeas Inc., please visit the corporate website, www.freeseas.gr About Magna Group Magna Group is a leading alternative investment firm that makes innovative structured investments and provides financial partnership to its portfolio companies; public and private, domestic and international. With a focus on the small and lower-middle markets, Magna Group maintains an active long portfolio of over 40 emerging growth and development stage companies at any given time. As a financial partner, Magna Group prioritizes relationship and works closely with portfolio companies to develop customized equity, debt and hybrid investment solutions. Please visit www.magnagroupcapital.com for more information. FreeSeas Inc. press release |
FreeSeas Announces Debt Purchase and Settlement Agreement with $20 Million Loan Forgiveness