Euroseas to Sell $29 Million in Shares

 

Euroseas Ltd. has announced  that it entered into an agreement to sell 25,000 shares of its Series B Convertible Perpetual Preferred Shares to a fund managed by Tennenbaum Capital Partners, LLC (TCP) and 5,700 shares to Preferred Friends Investment Company Inc, an affiliate of the company, for expected net proceeds of approximately $29 million. The company intends to use the proceeds for the acquisition of vessels and general corporate purposes. The transaction is expected to close by January 29, 2014. RMK Maritime acted as an advisor to the company in the transaction.

Aristides Pittas, CEO of Euroseas, commented, "We are pleased to welcome an institutional investor of the caliber of TCP as an investor to Euroseas. This fundraising is part of our strategy to make investments in dry cargo vessels at what we believe is an opportune time in the market cycle and to renew our fleet as evidenced by the newbuilding orders for 2 Ultramax bulkers we recently placed. We believe that raising funds through the sale of our Series B Preferred Shares is advantageous for our shareholders at this point in time and we look forward to continuing growing Euroseas with the support of TCP and the rest of our shareholders."

The Series B Preferred Shares will pay dividends (in cash or in-kind at the option of the company, subject to certain exceptions) during the first five years at a rate of 0% or 5%, depending on the trading price of the company's common stock. In addition, if a cash dividend is paid on the company's common stock during such time, then if the dividend paid on the Series B Preferred Shares is 5%, the holders of Series B Preferred Shares shall receive such dividend in cash and shall also receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. If, however, the dividend on the Series B Preferred Shares is 0%, then the holders of Series B Preferred Shares shall receive a cash dividend equal to the greater of 100% of the common stock dividend it would have received on an as-converted basis, and 5%. If a cash dividend is paid on the Company's common stock after the first five years, the holders of Series B Preferred Shares shall receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. The dividend rate will increase to 12% in years six and seven and to 14% thereafter. The Series B Preferred Shares can be converted at the option of their holders at any time, and at the option of the company only if certain share price and liquidity milestones are met. Each Series B Preferred Share is convertible into common stock at an initial conversion price of $1.45 (subject to adjustment, including upon a default). The Series B Preferred Shares are redeemable in cash by the company at any time after the fifth anniversary of the original issue date. Holders of the Series B Preferred Shares may require the company to redeem their shares only upon the occurrence of certain corporate events.

Subject to certain ownership thresholds, holders of Series B Preferred Shares have the right to appoint one director to the company's board of directors and TCP also has consent rights over certain corporate actions. In addition, the holders of Series B Preferred Shares will vote as one class with the company's common stock on all matters on which shareholders are entitled to vote, with each Series B Preferred Share having a number of votes equal to 50% of the numbers of shares of common stock of the company into which such Series B Preferred Share would be convertible on the applicable record date. The terms of the Series B Preferred Shares, including the rights, preferences and privileges of such shares are set forth in full in the Statement of Designation of the Rights, Preferences and Privileges of Series B Convertible Perpetual Preferred Shares of the company (the Statement of Designation) filed with the Registrar of Corporations of the Republic of the Marshall Islands. A copy of the Statement of Designation has also been filed with the SEC and is available on EDGAR.