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February 16, 2009

Davie Yards to resume operations

Export Development Canada has come to the rescue of Quebec shipbuilder Davie Yards Inc. (TSX: DAV), which now plans to resume limited operations in March

The yard's 1,100 workers have been laid off since December, when the yard said it needed to preserve limited cash reserves as it completed a refinancing plan. Davie's efforts to get its financial act together hit a significant bump in the road on January 20, when it was advised by its largest client, Cecon ASA that it had received a notice of cancellation of a $200 million senior secured credit facility from the participating lenders and DnB NOR Bank ASA as agent.

On December 17, 2008 Export Development Canada (EDC) had announced it would make available to Davie US$ 300 million in guarantees and loans. However, since Cecon ASA lost its US$ 200 million loan facility with DnB Nor, Davie, EDC and Cecon have worked to change part of the guarantee and loan scheme with EDC to a new US$ 200 million loan facility for Cecon.

"We are very pleased with the cooperation of EDC, which has issued a term sheet to Cecon for a US$ 200 million loan facility to help finance Cecon's newbuilding program of three offshore construction vessels at Davie," says Steinar Kulen, Davie's CEO. "To avoid further delays, EDC has also granted a bridge loan to Davie of US$ 20 million, the funding of which is subject to certain conditions and which will be reimbursed upon funding of the US$ 200 million loan to Cecon, and Cecon again can start paying their installments being due."

Davie also announced today that it has reached agreements with its clients for new price increases of US$ 35 million on its existing contracts..

Davie currently has five vessels on its orderbook: three offshore construction vessels for Cecon and two multipurpose accommodation vessels for Ocean Hotels Ltd. It has now agreed to amendments to the shipbuilding contracts for these vessels under which the clients have accepted price increases totalling US$ 35 million in addition to increases totalling US$60 million agreed upon in September last year.

Davie has developed a new production plan based on a reopening of operations in the beginning of March, and has reached agreements with its clients for new delivery times for all five ships corresponding with the new production plan.

Cecon said that it is accepting price increases totalling US$ 23 million, with a possibility for Davie to achieve a delivery bonus of US$ 1 million for each of Cecon's vessels II and III (hulls 718 and 719) if the vessels are delivered within the revised delivery dates. Delivery dates have been revised to January 29, May 15 and July 16, 2010 for the three vessels, respectively.


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