AS Tallink Grupp (the Company) has held financing negotiations with a number of partners during the current crisis. As per normal listed company practices, such negotiations have been held confidentially and the Company intended to disclose any relevant decisions according to stock exchange rules and its normal business practices. Tallink Grupp does not believe that its managerial decisions or the contents of the various proposals made to the Company should be discussed in public. For the first time in the Company’s history, a partner making a loan proposal, LHV, disclosed via news agency BNS (Baltic News Service) on 16 April at 16.49 that it has made a financing proposal to Tallink Grupp thus commencing a public debate on the topic of the financing proposal in the Estonian media. The information was published by LHV after Tallink Grupp had informed it, at 16.31 on the same day, of its decision to decline the offer. Tallink Grupp did not plan to commence a public debate on the topic of the said financing proposal. Since this topic has been widely covered in in the media and not all facts related to the proposal have been reflected accurately thus causing damage to the reputation of Tallink Grupp, the Company considers it important to make the terms of the proposal in question public and provide related comments.

In a number of interviews given on Friday, 17 April, the Chairman of the Supervisory Board of LHV Group, Mr Rain Lõhmus and the Chairman of the Management Board of LHV Group, Mr Madis Toomsalu, discussed the details of the proposal made to the Company, but did so selectively and, in some cases facts were not reflected correctly.

As a result of incorrect information shared in public, AS Tallink Grupp has decided to explain the contents of the proposal, which has been signed by Mr Madis Toomsalu on behalf of LHV Varahaldus and LHV Pank and by Stefan Kowski on behalf of Novalpina Capital, and which has been forwarded to Tallink Grupp by a representative of Novalpina Capital, Mr Kristjan Piilmann.

A reporter of the Estonian Public Broadcasting news programme „Aktuaalne Kaamera“ stated in the 17 April broadcast that according to Mr Rain Lõhmus „The proposal was completely reasonable and the interest for which was in the region between 5% and 10%.“ The same statement had been made by Mr Rain Lõhmus earlier on the same day in the „Uudis+“ programme of the Estonian Public Broadcasting radio station Vikerraadio.

In interviews given by Mr Rain Lõhmus on 17 April, he stated that after the conversion of the loan to shares, the stake of LHV and Novalpina Capital would be smaller than that of the current largest shareholder of AS Tallink Grupp. This statement is incorrect and is not in line with the terms of the proposal.

In interviews given to several media outlets on 17 April, the Chairman of LHV Group, Mr Madis Toomsalu, stated that „in essence, the proposal is for an unsecured loan. The risk levels of such loans are higher, particularly considering their lack of depreciation and, in essence, the subordination of such loans to all other loans,“ he  explained. Claiming that the proposal made is in essence an unsecured loan is also factually incorrect and not in line with the proposal made.

With all the above in mind, the Company considers it necessary to disclose the key points of the financing  proposal made by AS LHV Varahaldus, AS LHV Pank and Novalpina Capital with comments from Tallink Grupp.

1. Offered principal amount of funding up to EUR 200 000 000;
   
   
2. Maturity of up to 4 years;
   
   
3. Bullet repayment of principal amount at maturity date;
   
   
4. Possibility to prepay the funding after one year from closing, subject to 2% prepayment fee;
   Comment: prepayment fee of EUR 4m in case of EUR 200m funding.
   
   
5. Interest rate of 6% per annum +2% per annum payment-in-kind interest
   Comment: At least EUR 16m per annum and more than EUR 64m over 4 years for a EUR 200m funding. “More than” refers to the cumulative change of payment-in-kind interest cost.

6. Upfront issuing fee of 3.5%;
   Comment: EUR 7m in case of EUR 200m funding.

7. Warrant (i.e. option right) to convert the principal amount of the funding to shares with anti-dilution protection rights, at 10% discount to current or transaction date share price. Cash settlement option for warrants.
   Comment: The closing price of AS Tallink Grupp’s share on Nasdaq Tallinn stock exchange on the offer date was EUR 0.666.
   
   Thus the offered conversion price, at 10% discount, was EUR 0.5994. For a EUR 200m funding this equals to 333 667 000 common shares. AS Tallink Grupp has currently total of 669 882 040 shares listed.
   
   After exercising the warrant (the option) the shareholding of the issuers of the funding would amount to 33.2%.
   
   Based on public records on 17 April various LHV pension funds hold 9 904 158 shares of AS Tallink Grupp. After exercising the conversion warrant (option) the combined shareholding would amount to 34.2%.
   
   The above scenario would result in the holding of the currently largest shareholder, AS Infortar, to decline to 26.2%.
   
   The right to exercise the warrant (option) is the discretionary right of the lender(s). The fund’s right to exercise the warrant, as part of the offer, was confirmed by the Chairman of the Supervisory Board of AS LHV Grupp, Mr Rain Lõhmus, on 17 April in Estonian Public Broadcasting radio station Vikerraadio’s broadcast Uudis+.
   
   In case the warrant (option) is not exercised the lender(s) have the right to require settlement in cash i.e. payment of the difference in market price and option price of shares at the time of settlement.

8. Securities: First ranking pledges over all available material assets of Tallink. Further guarantees to be discussed.
   Comment: Currently the assets of AS Tallink Grupp amount to ca EUR 1.5 billion. The offer refers to need for additional guarantees.
    
9. Proportionate Supervisory Board representation with customary minority protection rights;
   Comment: Wish to obtain veto-rights in certain Supervisory Board decisions.

In the opinion of AS Tallink Grupp the financing offer does not serve the interests of more than 11,000 shareholders, approximately 7,300 employees, 6,800 cooperation partners and their employees and the strategic interests of state of Estonia. Accepting the terms and conditions of LHV and Novalpina would have required obtaining consent from the Group’s existing lenders which would not have been feasible given the two days given by LHV and Novalpina for accepting the terms of their offer.

Note: AS Tallink Grupp does not consider publishing the above terms a good business practice. However, given the prior publishing of the offer in the media by LHV and the following spread of false claims and partial disclosure of the offer terms giving potentially rise of false understanding of the situation we consider the current unprecedented disclosure necessary.


Joonas Joost
Advisor to the Management Board
Head of Investor Relations

AS Tallink Grupp
Sadama 5
10111 Tallinn, Estonia
E-mail joonas.joost@tallink.ee 

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