Louis Cruise Lines(LCL), will exchange all of its shares in ROC Holdings (ROCH) for shares held by the LTL parent Louis Tourist Agency (LTA) in the company that owns the Nicosia Hilton Hotel. ROCH holds a 51.4 percent share in Royal Olympic Cruise Lines (ROCL), while the remaining 48.6 percent is publicly traded on the NASDAQ. The ROCH ownership stake involved in the share exchange represents a 35 percent stake in ROCL overall.

As part of the deal, LTA will acquire the $20 million subordinated convertible bond issued by ROCL to LCL in 2001, and will guarantee the repayment of an additional $6 million loan owed to LCL by ROCL. LCL has the option to buy back all of the ROCH shares transferred to LTA within a 12-month period of the completion of the exchange, expected by the end of February.

Announced by ROCL on Jan. 16, the swap was announced on the Cyprus Stock Exchange a month before, at which time Louis stated, "The Board's decision to go ahead with the restructuring plan is linked to the difficulties faced by ROCL following the events of Sept. 11, which have affected and are expected to continue to affect, at least in the short term, the financial situation and prospects of ROCL. Instability in Israel and the non-timely delivery (i.e., non-delivery) of the Olympia Explorer as a result of technical problems have reduced profit expectations for 2001 significantly. The events of Sept. 11 have led to a grave deterioration of the situation, as the resulting loss in profit has reached $12 million and prospects for 2002 remain unclear."

According to the Louis statement, the restructuring is aimed at: (1) avoiding the risks created from ROCL "and the fragility of the market in which it operates"; (2) increasing LCL's profitability "as it will not be affected by possible future losses of ROCL"; (3) increasing the profits of LCL due to a higher share in the expected profits of the Nicosia Hilton; (4) improving LCL's balance sheet by removing "its liabilities of the high loans of ROCL" and the addition of the Hilton asset; (5) achieving synergies between Louis Hotels Group and Hilton; and (6) reducing LCL's dependency on tourism, because the broad customer base of the Hilton in Cyprus' capital is less affected by seasonality.

In other words, LCL, publicly traded but controlled by Chairman Costakis Loizou, has shifted its ROCL interest (and its associated debts and uncertainties) over to another Loizou-owned entity, thus improving LCL's balance sheets and providing it with an additional asset: the Nicosia Hilton.

And Royal Olympic - with its long-term debt of $212 million and a debt-to-equity ratio of 215 percent becomes the concern of Loizou's privately held LTA. Because the exchange is between two Loizou­ controlled entities, the ROCL board "does not consider that the exchange represents a material change in ownership of the Company." An ROCL spokesperson added that the new ownership structure will allow Louiza to institute his business decisions more expeditiously, as he will be exercising his control through his own privately held company, and not through the constraints of a publicly traded entity.

Counterbalancing the negative commentary made by Louis, the ROC board announced that as of Jan. 8, 2002, it had already sold 49 percent of the 124, 144 berths available for the year; by Jan. 8, 2001, only 22 percent of the 126,000 available berths for the year had been sold. Not included in the 2002 figures are some 22,000 berths offered by retail outlets on the Olympia Voyager Houston program, for which no booking information was available.

At press time, there continued to be uncertainty regarding the eventual fate of the Olympia Explorer, first scheduled to be delivered to ROCL in spring 2001 but delayed ever since by a dispute between ROCL and builder BLOHM+VOSS (B+V). Both sides released statements in November 2001 expressing positive movement in negotiations, and last week an ROCL spokesperson optimistically reaffirmed that "constructive talks" were progressing. However, in parallel with the private negotiations between the two parties, a binding arbitration case is under review by German authorities.

When asked about its current position, a B+V spokesperson confirmed recently reported comments by yard CEO Herbert von Nitzsch, who was quoted as stating, "We have had her (the Olympia Explorer) tested and no fault was found. We expect a result soon (from the arbitration process). "· Von Nitzsch was also quoted as stating that should ROCL not take the vessel, "There are interested parties, but they would want to bring the price down very much." He added that B+V could also charter the ship out on a temporary basis.

Finally, in other ROCL-related news, the cruise line is publicly denying reports by Greek unions that it has decided to switch a number of its ships to non­ Greek flag. According to a statement by the president of the Panhellenic Seaman's Federation, which believes such plans are in place, "We are determined to safeguard seafarers positioned on your (ROCL's) ships and will do all in our power, using all means available inside and outside Greece, to dissuade you from taking this course."