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Issuance of Euro Yen Zero Coupon Convertible Bonds due 2011
March 29, 2006
Mitsui O.S.K. Lines, Ltd. (the "Company") has resolved at the meeting of the Board of Directors held on March 13, 2006 to issue the Euro Yen Zero Coupon Convertible Bonds due 2011 (bonds with stock acquisition rights, shinkabu yoyakuken-tsuki shasai ) (the "Bonds") in the aggregate principal amount of 50 billion yen (including those in the principal amount of 5 billion yen issued upon exercise of the Greenshoe Option).
Background and Objective
In March 2004, the Company implemented the "MOL STEP (Mitsui O.S.K. Lines' Strategy towards Excellent and Powerful Group)", the three-year management plan covering April 2004 to March 2007, and furthermore, has conducted the "Review" on the MOL STEP in May 2005 with higher targets. The main theme of this mid-term management plan is "Growth", whereas the Company aims to develop the MOL Group into the world's largest, highest quality, unique ocean transportation group. The proceeds of the Bonds will be used for further investments in vessels, the structural base to achieve these targets. In addition, the conversion of the Bonds to the Company's shares (the "Shares") would lead to the strengthening of the Company's financial position. The Company aims to increase the Enterprise Value of the Group through the issuance of the Bonds.
Reasons for choosing the Convertible Bonds
The Company has chosen to issue the Convertible Bonds because it believed that the issuance of the Convertible Bonds was most suitable for the financial objectives of the Company. The Convertible Bonds are designed to; (i)strengthen the Company's financial position through the conversion of the Bonds to the Shares to be accelerated by the future rise in the market price of the Share, which will lead to an increase in the Company's capability to conduct further investments, (ii)minimize the dilution effect on earnings per Share to be caused by the increase of the issued Shares in accordance with the future conversion of the Bonds by setting the conversion price higher than the current market price of the Share, and (iii) minimize the interest cost through the zero coupon.
Terms of Issuance
| (1) | Aggregate principal amount of the Bonds | 50 billion yen |
| (2) | Offer price of the Bonds | 102.5% of the principal amount of the Bonds. (The principal amount of each Bond is 1,000,000yen.) |
| (3) | Issue price of the Bonds (the "Issue Price") | 100.0% of the principal amount of the Bonds. |
| (4) | Date of payment and date of issuance | March 29, 2006 |
| (5) | Maturity date | March 29, 2011 |
| (6) | Conversion Price* | 1,108yen |
| (References) Share price information on the pricing date (March 13, 2006) |
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a. Closing price of the Shares reported by the Tokyo Stock Exchange, Inc. (the "Closing Price") |
780yen | |
b. Conversion premium |
42.05% | |
*"Conversion Price" is the amount to be paid per Share upon exercise of the stock acquisition right incorporated in the Bonds (the "Stock Acquisition Right"). |
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| (7) | Number of the Shares to be acquired upon exercise of the Stock Acquisition Rights | The number of the Shares to be acquired upon exercise of the Stock Acquisition Rights shall be determined by dividing the aggregate Issue Price of the Bonds deposited at the same time upon exercise of the Stock Acquisition Rights by the holder of such Bonds by the applicable Conversion Price. |
| (8) | Amount to be accounted for as stated capital out of the issue price of a Share to be issued upon exercise of the Stock Acquisition Rights | 554yen per Share |
| (9) | Dilution effect on the current number of issued Shares upon exercise of the Stock Acquisition Rights in full at the initial Conversion Price | 3.74% |
This document is a press release announcing the issuance of bonds with stock acquisition rights (shinkabu yoyakuken-tsuki shasai) by the Company, and was not prepared for the purpose of soliciting investment. These bonds with stock acquisition rights have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the account or benefit of, any resident of Japan or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the account or benefit of, any resident of Japan, except pursuant to an exemption from the prospectus requirements of, and otherwise in compliance with, the Securities and Exchange Law and other applicable laws, regulations and governmental guidelines in Japan.
In the United Kingdom, this communication is directed only to persons who (i) have professional experience in matters related to investment or (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (all such persons together being referred to as "relevant persons"). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.
This document does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933 (the "Securities Act"). They may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act. If any public offering of securities is made in the United States, it will be by means of a prospectus that may be obtained from the Company that will contain detailed information about the Company and management, as well as financial statements. No public offering of the securities will take place in the United States.
Admission of the Bonds to the official list of the SGX-ST is not to be taken as an indication of the merits of the Company or the Bonds.