Solid Refinancing Supports Ballast Nedam's Strategic Ambitions

NIEUWEGEIN, the Netherlands, February 5, 2014 /PRNewswire/ --

Ballast Nedam is to strengthen its financial position in the long term with the support of all 5%-plus shareholders and banks. This refinancing comprises a rights issue of €30 million and €80 million of new loans that will mature in 2017. The rights issue will strengthen Ballast Nedam's balance sheet, and together with the new loans will provide the company with sufficient financial scope to concentrate fully on accelerating its strategy towards major integrated complex projects.

The shareholders and the banks have given their commitment based on the measures already taken and a clear direction for the company's future development. Ballast Nedam's strategy is oriented to major integrated complex projects that generate favourable results throughout the cycle.

The operational measures that Ballast Nedam is announcing alongside the financial measures include the restructuring of regional construction companies into a construction company with integrated operations, the disposal of several supply and specialized companies that no longer contribute to Ballast Nedam's strategic proposition, and strengthening of the governance structure. Following the now completed transition to a nationally operating infrastructure company and the related departure from the loss-making traditional markets, Ballast Nedam is continuing to move its organization along the adopted strategic route. As a result the company is better positioned for the future.

The persistently poor market conditions and disappointing results in 2013, and proceeds from disposals that materialized later than expected, necessitate further accelerated intervention. An operating loss is expected for the full year 2013 of between approximately €25 million and €30 million, of which between approximately €15 million and €20 million relate to reorganization expenses and impairment losses.

Financial and operational measures:

• a rights issue of €30 million to strengthen the balance sheet, guaranteed jointly by all 5%-plus shareholders (69%) and coordinating banks (31%);
• outline agreement with banks about committed loan facilities totalling €80 million until 2017, plus a bridge loan of €30 million to be repaid from the proceeds of the rights issue;
• further restructuring of the Building & Development segment; capacity adjustment affecting 150 jobs;
• the controlled disposal of several supply and specialized companies in the mid term;
• a stronger governance structure; expansion of the Board of Management with a Chief Operating Officer (COO);
• improved solvency in line with Ballast Nedam's strategic focus on major integrated complex projects.

Expected results for 2013

Ballast Nedam expects an operating loss of between approximately €25 million to €30 million, of which between approximately €15 million and €20 million relate to reorganization expenses and impairment losses. There is some uncertainty about the IFRS valuation of a contract variation on a major project, the A15 Maasvlakte-Vaanplein, about which discussion with the client is ongoing.

The operational losses are attributable to the A15 Maasvlakte-Vaanplein project, a number of old regional infrastructure projects, undercoverage in Building & Development, and two specialized companies. The capacity of the two specialized companies has been comprehensively reduced, and various loss-making products were discontinued in 2013. The old regional infrastructure projects date back to before the 2012 restructuring operation. All new projects since early 2013 have been subject to more stringent acceptance procedures.

The key activities on the major integrated projects have been profitable throughout the cycle. The results of the relevant business units in both Infrastructure and Building & Development are good, and endorse the chosen strategic route. The order book at year-end 2013 was €1.5 billion.

Improved solvency in 2014 through a rights issue of €30 million and the sale of Feniks Recycling

Ballast Nedam is strengthening its balance sheet through the rights issue of €30 million of depositary receipts for shares with tradable rights. Based on the preliminary statement of financial position and results for the full year 2013, the solvency calculated in accordance with the equity method at year-end 2013 was approximately 11%. Solvency is expected to rise to 15% following the €30 million rights issue. Solvency will continue to increase by a couple of percentage points in 2014 when the sale of Feniks Recycling materializes. Ballast Nedam is aiming for a solvency of over 20% and a leverage ratio less than 2.0x in the mid term.

The 5%-plus shareholders, Hurks Group B.V., Navitas B.V., Delta Lloyd Levensverzekering N.V., Delta Lloyd Deelnemingen Fonds N.V., Bibiana Beheer B.V., Via Finis Invest B.V. and Menor Investments B.V., have committed unconditionally to a participation of approximately 69% in the rights issue. The remaining amount of the rights issue is guaranteed by means of a 'volume underwriting commitment' subject to customary conditions by ING and Rabobank, acting as Joint Global Coordinators and Joint Bookrunners.

The rights issue will be submitted to the shareholders at the General Meeting of Shareholders to be held on 25 April 2014. The net proceeds of the rights issue will be used to reduce the company's debt burden, strengthen its financial position, and enhance its financial flexibility. The rights issue must be accompanied by an AFM-approved prospectus. Ballast Nedam intends to complete the issue before the end of the second quarter.

Agreement on committed loans

Ballast Nedam and the banking syndicate consisting of ING Bank, Rabobank and Royal Bank of Scotland have reached agreement on the key conditions for the committed loan facilities to be provided to Ballast Nedam.

The committed loan facilities of €110 million comprise a loan of €80 million that matures in 2017, and a bridge loan of €30 million that will be repaid in 2014 from the proceeds of the proposed rights issue. The loans of €60 million that fall under the current uncommitted facilities will be repaid using these funds. The financing documentation, including the usual bank covenants, will be completed in the coming weeks. The interest rate for the €80 million loan depends on a combination of the outstanding amount under the loans and the leverage ratio, and will initially be Euribor +4%. The customary securities will be provided in connection with the committed loans. It has been agreed with the banks that dividend on shares will be paid only if the leverage ratio is less than 2.0x. Ballast Nedam expects to pay no dividend in 2014.

The committed loans will satisfy the short-term liquidity requirements and provide sufficient financial scope for Ballast Nedam to concentrate on the execution of its strategy.

Further restructuring of the Building & Development segment; capacity adjustment affecting 150 jobs

Profit was under pressure in the regional construction companies because of low revenues, undercoverage and excessive costs.  In the first half of 2014, the regional construction companies will accordingly be restructured more drastically, towards a company with integrated operations that is oriented to larger, integrated complex projects, and a renovation company, Bouwborg, with national operations. The property and area development activities will be integrated into the Concessions business unit, which also manages the PPP and concession project portfolio. Laudy Bouw & Ontwikkeling will continue to be a regional company operating in the south of the Netherlands. This will also improve the cost structure. It is estimated that 150 jobs will be lost as a result of this capacity adjustment.

The restructuring operations will reduce the Ballast Nedam workforce by more than 25% from approximately 4,000 workers at year-end 2011 to fewer than 3,000 in 2014.

Controlled disposals of supply and specialized companies in the mid term

In the mid term the portfolio of supply and specialized companies will be brought further into line with the strategic focus through the controlled disposal of companies that do not contribute to major integrated complex projects. This measure will also further strengthen Ballast Nedam's financial position. The sales of the raw materials company Yvoir and of Gebr. Van Leeuwen Boringen completed in 2013. The sales processes of the participation in the raw materials company Beheermaatschappij Bontrup and of Feniks Recycling are ongoing.

Strengthening of Corporate Governance

A Chief Operating Officer (COO) will be appointed to the Board of Management in 2014. The selection procedure has now started. With the strategic focus, the operational control from six clusters will be further integrated from 2014 onwards to the three clusters of Infrastructure, Building & Development, and Specialized Companies & Supplies. The number of cluster Managing Directors had already been brought down to three in 2013. The Board of Management and the three cluster Managing Directors jointly form the Ballast Nedam Concern Council.

Improved solvency in line with Ballast Nedam's strategic ambitions

Ballast Nedam expects the demand for major, integrated complex projects to increase, both in the Netherlands and abroad, and has the strategic ambition to continue to expand its market share in the Netherlands in this market, while increasing the export of this knowledge in specific areas of expertise. In 2013 Ballast Nedam again added to its track record on the growth market of integrated projects with a number of projects, including:

• the Zaanstad Penitentiary PPP, which consists of design, new building, financing, maintenance and technical facility management for a 25-year period;
• the design, delivery and installation of the 80 foundations for the major German offshore wind farm, Butendiek;
• the design and construction of Hospital Nobo Otrabanda (HNO) in Curaçao.

Projects of this kind are expected to become more capital intensive. Clients will have an increasing preference for financially strong partners.

The Infrastructure segment has remained profitable throughout the cycle, and is expected to continue to perform well in 2014. The order book for 2014 is well filled, and the profitability of the regional projects is expected to improve considerably in response to the measures put in place in 2012 and 2013 to cease the company's involvement in relatively small infrastructure projects and to bring the old loss-making projects to a close. Ballast Nedam expects revenue to fall slightly in the Infrastructure segment through the avoidance of relatively small, generally less profitable, projects.

The company expects no significant improvement in the market situation for the Building & Development segment. However, the order book for much of 2014 is already filled. The Building & Development segment is continuing to aim for major integrated complex projects. Building & Development is performing well on relatively large projects, but for the regional components 2014 will be a transitional year as a result of the announced restructuring. As for the Infrastructure segment, Ballast Nedam expects a modest fall in revenue in the Building & Development segment because of the cessation of relatively small, loss-making projects in the regions. These regional components are expected to contribute to the profit again in 2014 onward.

The Specialized Companies segment will continue to focus on supporting the larger projects in other segments, and it is expected that measures taken in 2013 in the two loss-making companies will enable it to contribute again to profit in 2014. Nonetheless, revenue is expected to be 25% lower.

The Supplies segment is expected to show modest revenue growth. The revenue will grow in the next few years as a number of raw material extraction sites become operational, and with the growth of iQwoning®. The autonomous growth of Feniks Recycling and the rationalizations carried out in 2013 in the prefabricated concrete companies will have a favourable effect on profit.

Ballast Nedam engages in integrated projects in The Netherlands in four areas of work: housing, mobility, energy and nature. Within this area we focus on the niche markets: industrial construction, offshore wind turbines, secondary raw materials and alternative fuels. In a number of areas of expertise, we also operate internationally. The Ballast Nedam share is included in the Amsterdam Small Cap Index (AScX) of NYSE Euronext.

Ballast Nedam's approach is based on life cycle thinking and acting: we develop, construct, manage and recycle. We are involved in long-term management, maintenance and operation of projects and organize financial feasibility. Our supply and specialized companies deliver competitive edge through innovation, cost leadership and purchasing strength. Ballast Nedam's range of services is shifting towards modular products and specific product-market combinations with greater added value.

Ballast Nedam creates enduring quality combined with lower life cycle costs for its customers and society. http://www.ballast-nedam.com

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