Conclusion of Material Agreements Related to the Refinancing Process by Arctic Paper S.A.

GÖTEBORG, Sweden--()--Regulatory News:

The Management Board of Arctic Paper S.A. (the "Company") (STO:ARP) informs investors that on 9 September 2016:

1. The Company entered into a term and revolving credit facilities agreement (the "Facilities Agreement"), which was concluded between the Company as borrower, the Company's subsidiaries Arctic Paper Kostrzyn S.A., Arctic Paper Munkedals AB, and Arctic Paper Grycksbo AB, as guarantors (the "Guarantors") and a consortium of banks composed of: Bank BGŻ BNP Paribas S.A. ("BGŻ BNP Paribas"), Bank Zachodni WBK S.A. and the European Bank for Construction and Development ("EBRD") (the "Lenders"), under which the Lenders granted the Company term and revolving credit facilities in an amount not exceeding PLN 31,500,000 (thirty one million five hundred thousand zlotys) and EUR 52,400,000 (fifty two million four hundred thousand euro) (the "Facilities").

2. The Company entered into agreements with Haitong Bank, S.A. Spółka Akcyjna Oddział w Polsce ("Haitong") related to a bond issue programme of up to PLN 150,000,000 (one hundred and fifty million zlotys) (the "Bonds"), inter alia an agency agreement (the "Agency Agreement") and an underwriting agreement (the "Underwriting Agreement").

3. The Company, Mr Thomas Onstad, Bank Zachodni WBK S.A., Haitong, BGŻ BNP Paribas and other parties entered into an intercreditor agreement (the "Intercreditor Agreement"), under which a parallel debt structure for an amount equal to, in the relevant currencies, the sum of the liabilities under the Facilities, Bonds, hedging transactions and other liabilities set out in the Intercreditor Agreement was established for the benefit of BGŻ BNP Paribas.

4. To secure BGŻ BNP Paribas' claims under the Intercreditor Agreement and other claims set out in the security documents, the Company and the Guarantors will enter into, among other things, agreements for registered and financial pledges over shares and bank accounts and also agreements for the establishment of mortgages on real properties with BGŻ BNP Paribas, make statements on submission to enforcement for the benefit of BGŻ BNP Paribas and grant BGŻ BNP Paribas powers of attorney to use their bank accounts (in accordance with the other agreements mentioned above).

In report no. 9/2016 of 4 May 2016, the management board of Arctic Paper S.A. informed investors that a decision had been made to commence work in connection with the Company's plans to refinance the Company's and its subsidiaries' existing indebtedness under loan and facility agreements and obtain alternative financing. The aforesaid agreements represent such alternative financing and a change to the structure of the financing of the Company's group.

Centralising financing will enable more efficient management of financial liquidity and flexible adjustment of the level of financing of individual companies.

Below the Company provides detailed information regarding the matters presented above:

Re. 1 – The Facilities Agreement

Pursuant to the Facilities Agreement, the Lenders made the following loan facilities available to the Company:

(A) a term loan facility, payable in three tranches – tranche 1 of EUR 12,000,000 (twelve million euro) to be paid out by EBRD, tranche 2 of EUR 2,600,000 (two million six hundred thousand euro) to be paid out by BGŻ BNP Paribas, and tranche 3 of PLN 11,500,000 (eleven million five hundred thousand zlotys) to be paid out by Bank Zachodni WBK S.A. (the "Term Facility") and also investment term loan facilities A and B of EUR 8,000,000 (eight million euro) and EUR 10,000,000 (ten million euro) (the "Investment Facility") to be paid out by EBRD; and

(B) a revolving credit facility, to be paid out by BGŻ BNP Paribas and Bank Zachodni WBK S.A., payable in two tranches – Tranche 1 of EUR 19,800,000 (nineteen million eight hundred thousand zlotys) and Tranche 2 of PLN 20,000,000 (twenty million zlotys) (the "Revolving Facility").

The Term Facility was made available, subject to the appropriate terms of the Facilities Agreement, for:

(i) refinancing the intra-group liabilities of the Company to Arctic Paper Kostrzyn S.A. and/or financing intra-group loans granted by the Company for Arctic Paper Kostrzyn S.A. for the purpose of repaying the existing indebtedness, whereby the loan may also be replaced by an issue of bonds;

(ii) refinancing the liabilities of Arctic Paper Grycksbo AB by the Company's granting an intra-group loan for Arctic Paper Grycksbo AB;

(iii) refinancing the liabilities of Arctic Paper Munkedals AB by the Company's granting an intra-group loan for Arctic Paper Munkedals AB;

(iv) refinancing the capital expenditures of the Company's group companies, including, in particular, the capital expenditures of Arctic Paper Kostrzyn S.A. up to the amount of EUR 4,750,000 – indirectly by the Company's granting an intra-group loan to the relevant group member, whereby the loan may also be replaced by an issue of bonds; and

(v) financing or refinancing the financing costs referred to in the Facilities Agreement.

The Investment Facility was made available, subject to the appropriate terms of the Facilities Agreement, for financing investments into resource and operating efficiency improvements, as well as capacity expansion in Poland. With the planned investments the Company is seeking to significantly increase its competitiveness, expand its capacity and improve its energy and resource efficiency. The Company’s mill at Kostrzyn will be upgraded with investments under the EBRD’s Green Economy Transition (GET) approach to improve energy and waste efficiency.

The Revolving Facility was made available, subject to the appropriate terms of the Facilities Agreement, for refinancing the Company's intra-group liabilities or financing intra-group loans, whereby a loan may also be replaced by an issue of bonds, for:

(i) refinancing the overdraft liabilities of Arctic Paper Kostrzyn S.A. arising under the existing bank indebtedness;

(ii) refinancing the outstanding liabilities of Arctic Paper Grycksbo AB arising under existing factoring agreement concluded with Svenska Handelsbanken AB;

(iii) refinancing the overdraft liabilities of Arctic Paper Grycksbo AB;

(iv) refinancing the outstanding liabilities of Arctic Paper Munkedals AB, arising under existing factoring agreements concluded with Svenska Handelsbanken AB; and

(v) after the payment of the bank indebtedness – for implementing general corporate aims or aims related to the working capital of the Company's group (except for Rottneros AB, Arctic Paper Mochenwangen GmbH and Arctic Paper Investment GmbH and their subsidiaries), including granting intra-group loans, whereby a loan may also be replaced by an issue of bonds.

The disbursement of the Facilities (with the exclusion of the Investment Facility designated for the investment purposes of the Company's group, except for Rottneros AB, Arctic Paper Mochenwangen GmbH and Arctic Paper Investment GmbH and their subsidiaries, pursuant to the Facilities Agreement), is conditional on the fulfilment of conditions precedent by the Company and the Guarantors, including, among other things, the delivery of:

(i) copies of the Company's Statutes and the constitutional documents of the Guarantors;

(ii) certified copies of excerpts from the business register (Business Register) of the National Court Register relating to the Company and each of the Guarantors and, in respect of companies registered in Sweden, their certificates of registration, in each case dated no earlier than 7 days prior to the date of a utilisation request with respect to the relevant tranches of the Facilities;

(iii) to the extent required by applicable law and/or the statures or articles of association, copies of the resolutions of the shareholders' meeting, supervisory board (if any) and management board of the Company and Guarantors;

(iv) copies of the management board and the supervisory board of the Company, regarding the launching of the bonds issuance programme;

(v) copies of the insurance policies of the Company and the Guarantors;

(vi) the Facilities Agreement, the Intercreditor Agreement, the fee letters, the hedging agreement and the other financial documents mentioned in the Facilities Agreement;

(vii) copies of applications submitted for the registration of the security interests, which to be established must be recorded in the relevant register, and the delivery of excerpts from the land and mortgage registers maintained for the real properties held;

(viii) appropriate legal opinions issued, inter alia, for the Lenders; and

(ix) other documents or the fulfilment of other conditions set out in the Facilities Agreement.

Pursuant to the provisions of the Facilities Agreement, the Facilities bear interest according to a variable interest rate, which comprises the WIBOR reference rate in the case of the financing in PLN and the EURIBOR reference rate in the case of the financing in EUR plus the Lenders' variable margin that depends on the amount of the indebtedness ratios.

Under the Facilities Agreement, the relevant Facilities will be repaid by:

(A) in the case of the Term Facility – tranche 1 by 31 August 2022, tranche 2 by 31 August 2021 and tranche 3 by 31 August 2021, and in the case of the Investment Facility – by 31 August 2021 (in the case of both investment facility A and investment facility B); and

(B) in the case of the Revolving Facility –tranches 1 and 2 are payable by 31 August 2019, with the possibility of deferring that deadline in accordance with the Facilities Agreement .

The Facilities Agreement was concluded under English law and does not provide for the payment of contractual penalties. If any of the events of default set out in the Facilities Agreement occurs and is continuing, Bank Zachodni WBK S.A. (or other entity acting as agent pursuant to the Facilities Agreement) may, pursuant to the Facilities Agreement, notify the Company that the Facilities must be prepaid immediately.

Re. 2 – Agreements related to the planned bond issue

On 9 September 2016, in connection with the programme and planned issue of Bonds by the Company, the Company also entered into an Agency Agreement, an Underwriting Agreement, and other agreements of a solely technical nature related to the implementation of the Bonds issue programme. Under the Bonds issue programme, the Company plans, under the first series, to issue series [ ] Bonds of PLN 100,000,000 (one hundred million zlotys).

The subject matter of the Agency Agreement is the organisation by Haitong, which will act as the issue agent, dealer, paying agent, calculation agent, technical agent, administration agent and depositary, of the Bond issue programme.

Under the Underwriting Agreement for the planned issue of Bonds, Haitong agreed to acquire those Bonds that are not placed on the market, for up to a total of PLN 100,000,000 (one hundred million zlotys).

The agreements related to the planned issue of Bonds have been concluded under Polish law and do not provide for the payment of contractual penalties. The Company or Haitong may terminate the Agency Agreement and/or the Deposit Transactions Agreement by giving 30 (thirty) days' notice. Both the Company and Haitong may also terminate any of the above-mentioned agreement for the reasons set out therein.

Re. 3 – The Intercreditor Agreement

The Company also informs investors that on […] 2016 one of the conditions precedent stipulated in the Facilities Agreement was fulfilled, i.e. the Intercreditor Agreement was concluded. It regulates the priority of satisfaction of the creditors (the receivables set out in the Intercreditor Agreement will be satisfied pari passu, save for intragroup receivables, which will be subordinated to the Lenders' receivables), rules of pursuing claims, rules of enforcing the security interests and release of security interests.

Under the Intercreditor Agreement claims with respect to the parallel debt, comprising:

(i) the Company's parallel debt;

(ii) the parallel debt of the Company's selected subsidiaries – each being an independent and separate claim of BGŻ BNP Paribas (acting as security agent) against the relevant entity,

will be created.

The liabilities of the Company and each of the Guarantors under the parallel debt, covering, among other things, the liabilities under the Facilities Agreement and the Bonds, will be secured by the establishment of a security package. On the basis of the liabilities under the parallel debt, each of the above entities will be obliged to pay BGŻ BNP Paribas an amount that is the sum of all of that entity's liabilities under the basic legal relationships covered by the Intercreditor Agreement. The enforcement of any of the relevant entity's liabilities results in the automatic enforcement of the parallel debt in a corresponding amount. Payment by a relevant entity to BGŻ BNP Paribas of any amount in respect of the parallel debt results in the automatic reduction of the amount of the basic liabilities of that entity, the sum of which constitutes the parallel debt, by the amount of such payment. The repayment of the basic liabilities by the given entity results in the automatic reduction of the amount of the parallel debt of that entity by the amount of such repayment.

The Intercreditor Agreement was concluded under English law and does not provide for the payment of contractual penalties.

Ad. 4 – Security interests

The Company and the Guarantors will establish the following security for repayment of the liabilities under the Intercreditor Agreement:

· governed by Polish law (inter alia):

(i) financial and registered pledges over all of the shares, registered in Poland, held by the Company and the Guarantors, belonging to companies from the Company's group (except for Rottneros AB, Arctic Paper Mochenwangen GmbH and Arctic Paper Investment GmbH), save for the Company's shares;

(ii) mortgages on all of the real properties located in Poland and belonging to the Company or the Guarantors;

(iii) registered pledges on all Company's and Guarantors' property rights and movable assets constituting organised part of the enterprise located in Poland (excluding assets mentioned in the Facilities Agreement);

(iv) assignment of (existing and future) insurance policies relating to Company's and Guarantors' assets (excluding insurance policies mentioned in the Facilities Agreement);

(v) a statement by the Company and Guarantors on voluntary submission to enforcement in the form of a notarial deed;

(vi) financial and registered pledges over the banks accounts, registered in Poland, of the Company and the Guarantors;

(vii) powers of attorney for the Polish bank accounts of the Company and Guarantors registered in Poland;

(viii) subordination of claims of the intercompany lenders (contained in the Intercreditor Agreement).

· governed by Swedish law (inter alia):

(i) pledges over all of the shares, registered in Poland, held by the Company and the Guarantors, belonging to the group companies, save for the Company's shares, as well as pledges over Rottneros' shares (excluding Rottneros' shares free stake);

(ii) property mortgages on all real properties, belonging to the Company and the Guarantors, located in Sweden, on condition that only the existing mortgage deeds will be the subject of such security;

(iii) corporate mortgages granted by Guarantors incorporated in Sweden, provided that such security shall only be granted over existing corporate mortgage certificates;

(iv) assignment of (existing and future) insurance policies relating to Company's and Guarantors' assets (excluding insurance policies mentioned in the Facilities Agreement);

(v) pledges over the Swedish bank accounts of the Company and the Guarantors registered in Sweden, on condition that such security does not restrict the right to freely dispose of the funds deposited in said bank accounts up to the occurrence of an event of default described in the Facilities Agreement.

The agreements on the basis of which the above-mentioned security interests will be established do not provide for the payment of contractual penalties.

This information is disclosed pursuant Art. 17 sec. 1 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and was submitted for publication on 9 September 2016 at 5:10 pm CET, in reference to Arctic Paper’s current report no. 20/2016 filed with the Warsaw Stock Exchange.

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Contacts

Arctic Paper
Per Skoglund, acting President of the Management Board
tel. +46 733 21 70 09

Contacts

Arctic Paper
Per Skoglund, acting President of the Management Board
tel. +46 733 21 70 09