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March 6, 2009

Choppy seas for Golden Ocean

Yesterday, shares in dry bulk specialist Golden Ocean Group Limited (OSL: GOGL) rose after John Fredriksen's Hemen Holding Ltd (Golden Ocean's major shareholder, notified the company that it had purchased USD 165.3 million of nominal amount of the company's Convertible Bond Issue 2007/2012 and that all convertible bonds tendered had been accepted, thus acquiring more than 2/3 of Golden Ocean's Convertible Bond Issue.

Today, the other shoe dropped, and the shares were trading lower.

Golden Ocean announced its intention to summon a bondholders meeting where the company will propose to remove the market adjusted equity ratio covenants from the company's convertible bond loan agreement. This will avoid a breach of the company's loan agreement, an event which could have triggered a cross default with remaining existing financing.

"In order to complete a successful financial restructuring of Golden Ocean and create a solid platform for future operation, the company will be dependent on reducing its financial commitments and make sure that the company is fully funded going forward," said a stock exchange announcement by the company. "The company has entered into discussions with certain counterparties and financiers in order to achieve this."

"In view of the tight cash situation," continued the statement, "the company is dependent on coming to a conclusion to these discussions within the next few weeks. Such a solution is likely to include injection of some amount of new equity."

The statement said the objective for the restructuring is to create a robust business model for Golden Ocean where reduced commitments, combined with the company's modern fleet and good time charter coverage gives downside protection to meet a potential continued difficult freight market.


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