Mar 28, 2017

Fund Raising by Subordinated Loan

March 28, 2017
Hitachi Zosen Corporation


Fund Raising by Subordinated Loan

Hitachi Zosen Corporation (the “Company”) resolved the fund raising of Yen 20 billion Subordinated Loan at Board of Directors Meeting held today as outlined below.

1.    Objective of the Subordinated Loan
   In our current medium-term management plan “Hitz VisionⅡ”, the Company set three objectives namely i) strengthening
   profitability, ii) expansion of the scale of operations, and iii) fortifying financial position. In the new medium-term
   management plan starting from April 2017, the Company is planning to carry out business strategies to realize
   profitability enhancement, and aiming to strengthen our financial position and maintain and improve capital efficiency.

   As a part of our finance strategy to support business plan, we have decided to sign the loan agreement of Subordinated
   Loan. The Subordinated Loan ranks between debt and equity. While classified as a liability in accounting wise, it has
   similar characteristics as capital such as option to defer interest payment, ultra-long dated maturity and subordination in
   the process of liquidation or bankruptcy. Therefore, we are expecting to receive the eligibility certification from rating
   agency, R&I and JCR, to treat 50% of the Subordinated Loan as capital in nature which should contribute to the
   substantial enhancement of financial position without the dilution of equity.

2.Summary of the Subordinated Loan


 Total amount:

 Yen 20 billion


 Contract date:

 March 28, 2017


 Drawdown date:

 May 31, 2017


 Maturity date:

 May 31, 2077
 The Company, however, retains an early repayment option  for partial or full
 principal amount on any interest payment  date on or after May 31, 2022.


 Use of funds:

 Ordinary business purposes


 Restriction of refinance:

 With respect to early repayment of the loan, we intend to raise funds that the
 credit rating agencies have approved the same or higher equity credit as the
 loan during the 6 months preceding the early repayment date.
 Irrespective of the foregoing, after five years of the drawdown date, when
 following conditions are met, the company may forego the refinance of the
 loan with an instrument which has received eligibility certification equivalent
 to equity.

 i. The consolidated shareholders’ equity is increased by Yen 20 billion at the
  fiscal year end immediately preceding early repayment date in comparison
  to March 31, 2017.

 ii. Consolidated shareholders’ equity ratio at the fiscal year end immediately
  preceding early repayment date is higher than March 31, 2017.


 Interest payment:

 The company, at its discretion, may defer the whole or part of interest



 Creditors of the Subordinated Loan have right to claim payment that is
 subordinated to all senior creditors with respect to cases where the
 Company begins liquidation proceedings, bankruptcy proceedings, corporate  reorganization proceedings or civil rehabilitation proceedings.
 The terms and conditions of this Subordinated Loan agreement shall not be  changed in any respect whatsoever to the disadvantage of senior creditors of
 the Company.


 Equity credit attributes:

 Class 3, 50% (Rating and Investment Information, Inc.)
 Middle Level, 50% (Japan Credit Rating Agency, Ltd.)