As part of Torm’s 2012 restructuring agreement, three bank facilities were given certain specific option rights up until 31 July 2014 that could trigger a sales process for up to 22 of Torm’s product tankers, and the subsequent repayment of related debt.
As of today, Oaktree Capital Management has exercised its option rights to acquire the last 13 tankers financed by their bank facility. Last year, Oaktree exercised their option for nine of Torm’s product tankers.
The vessels to be sold to entities controlled by Oaktree Capital Management are as follows:
- TORM Helene (LR2, 1997)
- TORM Ingeborg (LR2, 2003)
- TORM Valborg (LR2, 2003)
- TORM Gunhild (MR, 1999)
- TORM Anne (MR, 1999)
- TORM Mary (MR, 2002)
- TORM Vita (MR, 2002)
- TORM Gertrud (MR, 2002)
- TORM Gerd (MR, 2002)
- TORM Thyra (MR, 2003)
- TORM Freya (MR, 2003)
- TORM Helvig (MR, 2005)
- TORM Ragnhild (MR, 2005)
According to a statement by Torm, Oaktree will place the 13 vessels under TORM’s commercial control and utilize TORM’s integrated operating platform for technical management.
“We acknowledge Danish Ship Finance’s commercial incentive to exercise their sales option before it expires in July and thereby trigger a sales process. In this light, I am very pleased that TORM’s strong operational performance is recognized by a strategic investor in the product tanker space, which enables us to maintain all 13 vessels in TORM’s commercial control and technical management,” commented Torm CEO Jacob Meldgaard.
Upon completion of the sale, TORM’s owned fleet will consist of 43 product tankers and two dry bulk vessels.
Financial effects – via Torm
With the exercised option rights and the agreement in principle, TORM revises the forecasted 2014 EBITDA from USD 90-130m to USD 70-110m.
Upon completion of the transaction, the associated vessel financing will be fully repaid and thereby reducing the Company’s debt by USD 223m. TORM’s liquidity position is expected to remain largely unaffected, currently at USD 110m consisting of USD 22m in cash and USD 88m in undrawn credit
The agreement in principle is expected to lead to an impairment charge of USD 150-200m, which will be recognized in the financial statements in the first quarter of 2014. Therefore, TORM revises the forecasted 2014 loss before tax from USD 70-110m to USD 230-280m.
As of 31 December 2013, TORM’s equity amounted to USD 118m, which means that the expected impairment charge likely will result in negative equity in the first quarter of 2014. The Board of Directors will make the mandatory report on the financial position of the Company at the upcoming Annual General Meeting on 3 April 2014. Despite the financial effects, TORM expects to remain in compliance with the financial covenants for 2014.
“The Restructuring Agreement from 2012 provided a financial safety net, which TORM continues to benefit from. With the current liquidity of more than USD 100m and positive operational cash flow, TORM has the manoeuvrability and support from the lenders to secure a long-term capital structure,“ says Chairman of the Board Flemming Ipsen.
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