MAIN FACTS:

• Insufficient demand of global dry seaborne activity in recent months has translated into underutilization of the global shipping capacity, as a persistent supply of new vessels enter the market.
• This is particularly severe with the larger size tonnages.
• As one of the market participants in dry bulk market, the company is exposed to the current low freight rate environment mainly due to an oversupply of tonnages, and therefore had to enter into some loss-making charter contracts in early 2012 as part of its fleet is due for contract renewal in the prevailing market conditions.
• Further details of the financial information of the company will be disclosed in its first quarter results announcement in late May 2012.
• At 0920 GMT shares traded 12% lower at NOK9.01.

-By Dominic Chopping; Dow Jones Newswires

The units were recently trading 5.2% lower at $15.56, compared with the offering’s price of $15.68 per unit.

The owner and operator of dry cargo vessels said it plans to use the proceeds to expand its fleet and for general partnership purposes.

-By Melodie Warner, Dow Jones Newswires

Torm announced last week that unnamed investors have submitted specific, conditional proposals to inject between $100 million and $200 million in equity and cash into the company, which is carrying $1.8 billion in interest-bearing debt, and has been pressured by plummeting freight rates amid overcapacity on the shipping market.

However, the FT said three people involved had confirmed to the paper that negotiations were fruitless and that Torm’s three biggest lenders–Danske Bank A/S (DANSKE.KO), Danish Ship Finance and Nordea AB (NDA.SK)–would now take charge.

FT added that the banks “are likely to seek a restructuring that avoids the time and expense of a formal bankruptcy procedure in Denmark or the U.S., where Torm is listed on Nasdaq.”

Newspaper Web site: www.ft.com

-By Niclas Rolander, Dow Jones Newswires

Like many of its shipping-industry peers, Torm, which is carrying $1.8 billion in interest-bearing debt, has been pressured by plummeting freight rates amid overcapacity on the shipping market, while the outlook for the global economy remains uncertain. In February, Danish shipping and oil company A.P. Moller-Maersk A/S (MAERSK-B.KO) warned that its Maersk Line–the world’s largest container shipping company–will continue to struggle with overcapacity in 2012.

Torm said the unnamed investors have submitted specific, conditional proposals to inject between $100 million-$200 million in equity and cash.

“A very important step has been taken, and the risk of an in-court solution in Denmark or anywhere else will be eliminated if and when the conditions in these proposals have been fulfilled,” Torm’s Chairman N. E. Nielsen said in a statement.

Torm said the new group of investors will subsequently have a significant shareholding in the company, while the final ownership is subject to terms that are being negotiated.

The talks involve a decrease of Torm’s existing share capital while at the same time granting existing shareholders the chance to subscribe for new shares, the company said. Other stakeholders, such as banks and time charter partners, may also be offered the opportunity to become shareholders.

The Danish company’s grace period with its banks expired March 15.

“The structure of the proposals available from the investors is that the banks are to grant Torm a standstill period, but that the banks are to expect to receive full and satisfactory settlement of their outstanding loans to the company,” said Torm.

While it is positive that Torm is in investor talks about a cash and equity injection, analysts warned against celebrating prematurely.

“It is comforting to hear that there are investors who are considering investing in Torm. But nothing is settled or final yet,” said analyst Dan Togo Jensen at Handelsbanken Capital Markets.

Whether the sum the investors offer to invest will be enough to save the company depends on a number of factors, according to Jensen.

“It all depends. As is, no, but if banks and time-share owners are willing to take a haircut you could see a future structure where this will be enough,” he said.

At 1255 GMT, Torm shares traded 5% higher at DKK3.15.

-By Katarina Gustafsson, Dow Jones Newswires

FPSO

RIO DE JANEIRO -(Dow Jones)- Billionaire Brazilian businessman Eike Batista, the world’s seventh-richest person according to Forbes, doubled down on his bet that large oil fields discovered off the southeast coast of Brazil will lead to a flood of orders for production platforms and drilling rigs.

Batista and his Grupo EBX holding company plan to buy up to $1 billion in shares of shipbuilding and oilfield services company OSX Brasil SA (OSXB3.BR), part of his industrial empire that spans oil, coal, iron ore and logistics. While investors were aware of the possibility of a capital infusion at the time of OSX’s March 2010 initial public offering, Batista’s unusual and often brash style still has some scratching their heads at why the company needs additional cash just two years after raising $1.4 billion.

“Like every move to increase capital, there are some reservations among investors,” said Joao Pedro Brugger, who manages $100 million in securities at Brazil’s Leme Investment Fund and holds OSX Brasil shares. Despite his wariness about the deal, raising capital was an important move that reinforces OSX’s ability to invest, Brugger said.

OSX is positioning itself as a key player in the renaissance of Brazil’s shipbuilding industry, one of a series of new shipyards under construction to meet demand for oil platforms and drilling rigs the government wants built in the country. Oil companies operating in Brazil are obligated to use a certain percentage of locally produced goods and services under strict local content rules.

At the time of the IPO, OSX was able to raise enough cash to fund the company’s equity stake in five floating production storage and offloading vessels, or FPSOs, and two well-head platforms ordered by sister company OGX Petroleo e Gas Participacoes SA (OGXP3.BR, OGXPY). So Batista pledged an additional $1 billion in capital via a put option to be exercised when OGX made new orders for platforms.

“I would be more worried if he hadn’t decided to inject more capital [into OSX],” said one analyst, who declined to be named because he’s not authorized to speak with the press. “Without more capital, the company doesn’t have any way to grow.”

More important, OSX’s IPO likely would have flopped if investors knew that the company would need to issue more shares to grow in two years, the analyst explained. “There are no skeletons in the closet,” the analyst said. “Minority shareholders aren’t suffering any losses.”

OSX is using a 20% equity, 80% financing project-finance model that is relatively standard in the oil industry to build out its shipyard and each FPSO that it will own, operate and lease to OGX, Chief Financial Officer Roberto Monteiro said Thursday in an interview.

“Each one of these units will have a different project finance, where we put in 20% equity and we have to raise 80% in outside debt,” Monteiro said. Recent orders for 11 medium-range oil tankers and a pipe-laying vessel, however, are “cash-flow neutral” and won’t require the same type of 80-20 financing model, Monteiro said. OSX will receive incremental cash payments to continue the shipyard-specific orders as key construction milestones are reached, the executive explained.

“When are new orders from OGX going to come in? This is going to be a trigger for when this option is exercised,” Monteiro said. While Batista declined to talk specifics, he said in a conference call with investors that “absolutely” new platform orders are on the way. The put option will be exercised in two transactions: the first in the second half of 2012, followed by one in March 2013, Batista said.

OGX needs to have at least eight platforms operating in order to meet its 2015 production target of 730,000 barrels of crude per day, according to Credit Suisse analyst Emerson Leite. With five on order so far, Credit Suisse expects three more could be ordered yet in 2012.

–By Jeff Fick, Dow Jones Newswires

Copyright (c) 2012 Dow Jones & Company, Inc.

Berlian Laju said in January its subsidiaries had failed to make debt payments, then in February, the shipper–which has a fleet of oil, gas and chemical tankers–said it had defaulted on six U.S. dollar and local currency instruments. In January the company said that it estimated around $418 million in principal debt payments are due to be made this financial year.

Often seen as a barometer of global economic health, the shipping sector has been hurt by high fuel costs and a slump in trade that has suppressed freight rates. The company said operating in such conditions had “significantly impacted” its fiscal position.

The court order announced Tuesday will prevent any of the company’s assets from being impounded by a “limited number of creditors” for three months, the company said. It said it had obtained the order with the support of the largest group of bank creditors, who are led by Norway’s largest lender, DNB ASA (DNB.OS), according to Cosimo Borrelli, managing director of accountants Borrelli Walsh, which has been appointed by Berlian to help restructure the firm.

“There are a couple of small creditors that tried to arrest two ships overseas and that’s really what prompted taking the steps we did,” said Borrelli. When used in a maritime context, arresting a ship refers to trying to gain jurisdiction over a vessel that is the subject of a law suit.

Borrelli declined to name the creditors that were seeking to impound the vessels, but said that the order was sought with support from the company’s largest group of bank creditors.

Berlian Laju’s latest financial report from November 2011 states that one of the company’s subsidiaries in February 2011 obtained a loan with a maximum credit of $685 million from European banks DNB ASA, BNP Paribas SA (BNP.FR), ING Bank NV, NIBC Bank Ltd, Nordea Bank Finland Plc (NDA.SK) and emerging markets bank Standard Charted Bank PLC (SCZ.ZM). Sweden’s SEB AB (SEB-A.SK) in May 2011 joined the group of lenders, according to the report.

DNB were not immediately available for comment on the court order.

Borrelli said it is “very early days” for the company’s restructuring, and an update on developments should take several weeks. “The focus at the moment is ensuring it’s business as usual and the customers and suppliers are happy, which has been a very successful process so far,” he said.

“We’re not expecting a long-winded restructuring process, it’s quite a committed and planned effort by both the company and us and FTI and the execution so far has been pretty good,” he added.

The company has appointed FTI Consulting to carry out a financial assessment of the company. Trading in the company’s shares in Jakarta and Singapore was suspended in January.

-By Matthew Allen, Dow Jones Newswires; Joanne Chiu in Hong Kong and Gustav Sandstrom in Stockholm contributed to this article

Image courtesy Danaos Shipping

We are downgrading Danaos to Neutral from Outperform, and Seaspan to Underperform from Neutral. – Credit Suisse

Despite both Danaos’ (ticker: DAC) and Seaspan’s (SSW) solid contact coverage in 2012, we are downgrading both names under a backdrop of capacity rationalization by their customers. The liner industry (customers) is trying to figure out how to make money and capacity reductions seem to be doing the job.

Idle ship capacity stands at 5% of the fleet, and we expect more not less as new ships are delivered this year. This should keep charter rates (already around cash costs) at depressed levels into 2013 and drag down asset values along the way.

Rationalization and ton-mile contraction is not good for ship owners. Last year was another tough year for the liner industry with the major liner companies returning to their losing ways. This has driven many shippers to rationalize their services, which has included increased vessel-sharing arrangements (think better-utilized vessels but less of them). Additionally, while we expect strength in regional trades such as Intra-Asia and Far East-Middle East, we expect slower growth on the Far East-Europe trade and the transpacific trade to drive ton-mile contraction. In other words we are not expecting the container trade to be a two times multiple of global growth.

Fleet growth is slowing, but still a lot on the way. We expect containership fleet growth of roughly 9% in both 2012 and 2013 versus our containership demand growth estimates of 5% in 2012 and 7% in 2013 — this still points to a supply demand mismatch. Barring a surge in global container trade, we expect charter rates to remain at depressed levels in 2012 and below midcycle levels in 2013.

- Gregory Lewis and Anthony Sibilia, Barrons Online

Glencore has agreed to issue 2.8 of its shares to Xstrata shareholders for every Xstrata share held, as it seeks to create a commodities juggernaut with a market capitalization, at the time of announcement, of around $90 billion and assets in oil, base metals, precious metals, shipping and agriculture. Four Xstrata shareholders, accounting for nearly 5% of the company’s total outstanding capital, have said this isn’t sufficient. About 16.4% of Xstrata’s voting shareholders need reject the deal to block it.

“We believe it is a very fair price. It is a price that has been accepted by the Xstrata CEO, unanimously accepted by the [Xstrata] board and proposed by the board to the their shareholders,” Ivan Glasenberg told Dow Jones Newswires Monday.

Glasenberg said Glencore’s management will now go on a roadshow, in which it will meet with Xstrata shareholders who don’t own Glencore shares, to better explain what he sees as misconceptions about Glencore’s business–the quality and size of its industrial assets and the way its marketing business operates.

“Our job now is to visit the Xstrata shareholders and try to convince them that the [Glencore] paper they are getting is good paper,” Glasenberg said. “We have to explain to them a bit more of the Glencore model.”

He declined to comment on whether there was scope to increase the share swap ratio.

A Dow Jones poll of seven analysts show that Glencore will likely have to bump up the ratio to 3.0 to secure a favorable vote from Xstrata’s shareholders.

Glasenberg said the current deal represents an attractive premium to Xstrata shareholders, particularly since Xstrata’s management will hold many of the top jobs in the merged company and a merger of equals usually doesn’t have very large premiums.

Glasenberg said that his company has “tier-one, low-cost producing assets,” as evidenced in the Congolese Katanga and Mutanda copper mines that are mining “higher grades of copper than any mine in the world” and have long lives of 40-50 years, he said. Similarly, the Prodeco coal mine in Colombia and Kazzinc’s gold operations are also low-cost, tier-one assets, he said.

Glasenberg also said his job was to convince Xstrata’s shareholders that Glencore’s marketing business isn’t a platform for speculative derivatives trading, but rather a logistics business which generates profits by, for instance, blending products to better suit customer needs and directing shipments to benefit from discrepancies in regional commodity pricing.

Glasenberg also said that Glencore’s investment model is focused on generating high return on equity, not just on building a mine for the sake of building a mine. He said that the company has generated 35%-60% average annual return on equity since it was founded 37 years ago.

Glasenberg will begin a roadshow, along with Chief Financial Officer Steve Kalmin, to explain the merits of the Glencore business to Xstrata shareholders, ahead of a second roadshow, in April, with Xstrata’s Chief Executive Mick Davis.

-By Alex MacDonald, Dow Jones Newswires

The firm has been facing problems finalizing mainly two projects–the Norwegian Yme oil and gas field, and Deep Panuke in Canada.

The delays in both projects have already triggered the departure of some of the company’s top management. In August last year, former Chief Executive Tony Mace announced his intention to step down in order to take responsibility for the delays, while in January, SBM’s Chief Financial Officer Mark Miles said he would depart in May.

For 2011, SBM Offshore posted a net loss of $440.6 million following charges of $978 million, compared with a net profit of $276 million the previous year.

The company also announced a further $407 million charge for delays in the two projects on top of a previously announced charge of $450 million, plus a couple of minor charges for other projects.

The extra charge exceeded analysts’ expectations for additional charges in a $100 million to $300 million range.

The company said it will not pay a dividend to investors.

Revenue in 2011 was slightly up, to $3.2 billion from $3.1 billion a year-earlier.

The Dutch oil services firm is involved in legal action over cost overruns on Yme, operated by Talisman Energy Inc. (TLM), as well as for Deep Panuke, operated by EnCana Corp. (ECA). SBM said it hopes to recover the extra costs from its clients, but has been forced to write down the overruns immediately due to the uncertainty of success in its legal challenge.

The company’s shares opened Friday 1.2% below Thursday’s close of EUR13.28.

“Resolution of the Yme difficulties is an absolute priority and we are in constructive discussions with both clients on the best way forward,” the company’s chief executive Bruno Chabas said in a statement.

Analysts said the size of the write-down is disappointing. “However, we have the feeling that after this kitchen-sinking operation the company is well positioned,” Rabobank said in a note. Rabobank maintained its buy rating for SBM Offshore, but said the company’s results imply a lowering of the price target by approximately EU0.50, to EUR19.50.

But the company was more optimistic for the year-ahead. For 2012, SBM Offshore expects $4 billion in turnover on the “strongest order portfolio on record” of $16.9 billion, up from $11.5 billion the previous year.

-By Archibald Preuschat, Dow Jones Newswires

Indonesia's biggest oil and gas shipping firm, PT Berlian Laju Tanker, faces significant financial issues after failing to make debt payments of $46 million due in February.

HONG KONG (Dow Jones)–The global slowdown in the shipping industry is claiming more victims and industry experts expect more defaults in the coming months as heavy debt loads and tight financing squeeze the weaker players.

The shipping industry, often seen as a barometer of global economic health, has been hurt by high fuel costs and a slump in trade that has suppressed rates. The retreat of lending from European banks–which traditionally account for the bulk of shipping finance–has further clouded their outlook.

The shipbuilding industry, heavily centered in Asia, with the biggest players including South Korea’s Hyundai Heavy Industries Co. (009540.SE), Samsung Heavy Industries Co. (010140.SE) and Daewoo Shipbuilding & Marine Engineering Co. (042660.SE), has been the most vulnerable because of its capital-intensive nature that requires builders to invest billions of dollars to keep their production up and running, and fund operating expenses.

On Tuesday, Indonesia’s biggest oil and gas shipping firm, PT Berlian Laju Tanker (B66.SG), became the latest casualty of the downturn, saying it couldn’t make debt payments of $46 million that was due in early February. This comes after Norway’s Frontline Ltd. (FRO.LN), one the world’s largest oil tanker operators, wasn’t able to meet its covenants last year due to an oversupply of vessels, and said it would create a new entity to assume $666 million in bank debt.

“2012 will be a very difficult year,” said Kevin Oates, managing director at ship financing consultancy Marine Money Asia. He estimates that the industry will require around US$200 billion of funding over the next few years, a move that will likely drive up the cost of borrowing for many shipping firms and further hurt their ability to grow.

Already, small shipbuilders in China and South Korea such as Nantong Qiya Ship Engineering Co., Huigang Shipbuilding Co., and Samho Shipbuilding Co. have filed for bankruptcy. Samho, based in South Korea, last month underwent a liquidation process.

“There are cases of weaker shipyards going through a bankruptcy process in China and some of them have approached us for help,” said Simon Liang, chairman of privately-owned Chinese shipbuilder Sinopacific Shipbuilding Group. He said his firm, however, is very cautious about making acquisitions amid the downturn.

“Many shipbuilders aren’t interested in small shipyards because they don’t have strong assets that can be acquired,” said an official at South Korea’s Samsung Heavy Industries, one of the country’s biggest shipbuilders.

Combined new orders from more than 1,500 shipbuilders in China, which aims to become the top shipbuilding nation by 2015 to overtake South Korea, have fallen more than 50% last year, according to a recent report from the China Association of the National Shipbuilding Industry.

South Korean shipbuilders say that demand for commercial ships such as bulkers, tankers and container carriers will remain weak throughout the year due to continuing worries about the euro-zone debt crisis.

“The oversupply of new vessels, which is driving down shipping rates and higher bunker fuel costs will be the biggest challenges this year,” said a spokesman at Hanjin Shipping Co. (117930.SE), South Korea’s largest shipping company by sales. “At a time when there’s no demand, we have no choice but to remain cautious in our spending.”

In light of credit tightening from banks, many shipping companies are turning to the bond market or private equity for funding. But industry analysts say even that won’t be enough.

The total amount of shipping bonds issued in Asia surged 90% to US$7.97 billion in 2011 from US$4.12 billion the previous year, surpassing the historic high of US$7.81 billion the industry raised in 2009, Marine Money Asia estimates.

“There are of course pockets of finance available from some private equity firms in Europe, the U.S. and the East, but the amount is just a drop in the ocean,” Mr. Oates said.

London-listed Chinese shipbuilder and shipping firm, Dongfang Shipbuilding Group Co. (DFS.LN), which manufactures small and medium-sized vessels such as chemical tankers and container ships, said last month that its 49%-owned Zhejiang-based shipbuilding unit, DFS Shipbuilding, is in discussions with its banks and the local provincial authorities to secure financing following a significant reduction in its order book. The firm said two of its large contracts– worth US$52.6 million– were cancelled after it failed to secure financing from banks.

-By Joanne Chiu and Kyong-Ae Choi, Dow Jones Newswires