Note 32 - Inventories

A net bargain purchase gain was recorded at USD 18.3 million following the acquisition of the remaining 50% shares in Secunda. The gain has been tested against fair market value for the previous held 50% shares in Secunda, the fair market value of the individual vessels and the fair market value of the contracts. Based on such analysis management has concluded to recognize a bargain gain of USD 18.3 million in the income statement. The acquisition of the remaining 50% shares was a consequence of the previous owner’s decision not to contribute to further funding of Secunda following certain circumstances when Secunda took delivery a new PSV in May 2016. Secunda had a contract with a Polish yard for the delivery of a highly specialized newbuilt PSV that was to commence operations for a major oil-company offshore Canada.

As the vessel was delayed from the yard in Poland, the client notified Secunda that it intended to cancel the charter party due to the delayed delivery. Following this information, the financing bank informed Secunda that the financing commitment for the vessel was terminated with immediate effect. Siem Offshore Inc., as the most active owner of Secunda, managed to get a tender for a alternative financing package in place, however at less favorable terms than the original financing. Further, the import duty that would be payable to Canandian customs was no longer considered as being a part of the vessel purchase price, and had to be financed by funds provided by the owners of Secunda. At this stage, the previous owner declared that he did not accept the increased risk following the delayed delivery of the vessel and that he would not contribute with shareholder’s funding that was a term under the debt agreement. Further, the previous owner declared that his investment in Secunda was not regarded as part of his core business. As Siem Offshore Inc. held a first right of option to acquire the 50 % shares, the previous owner accepted to sell his 50% shares at total CAD 1. Siem Offshore Inc. then made additional funds available to sign a new debt financing agreement. The Charter party with the Oil-company was renegotiated and the cancellation notice was withdrawn.

Despite a very short timeline to get a new debt financing in place, to accelerate the delivery of the vessel, to provide extra owner’s funding and to renegotiate the charter party with the client, Siem Offshore Inc. managed to enable Secunda to take delivery of the vessel and to commence the operation as requested by the client.

Board Of Directors

Financial Statements