(Dow Jones) Danish tanker and bulk vessel operator Torm A/S (TORM.KO) said Tuesday it is in final talks with two international groups of investors for a capital injection that could save the indebted company as it staggers on the verge of bankruptcy.
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