Bank Deal Safeguards Havila Shipping
Havila Shipping ASA, listed on the Oslo Stock Exchange, has reached a refinancing deal with the banks which will help secure the shipping company until 2018.
With this, the keystone to getting through the tough times is in place, said the company in a statement. A new equity issue of 200 million NOK ($22 million) and refinancing of bonds remains.
Havila Shipping is a leading supplier of supply services to international offshore companies. The company’s fleet is the newest of the larger offshore companies in Norway. The company operates 28 offshore service vessels in anchor handling, subsea operations, platform supply and multi-field rescue services.
The most central elements of the bank agreement are a sharp reduction in loan repayments, a lower credit margin, a conversion of interest to debt for the period 2016 to 2018, a renewal of the maturity date of balloons to June 30, 2020 and unsecured liabilities to 31 December 2020.
Njål Sævik, CEO of Havila Shipping, is very pleased to have reached an agreement with the banks: “The company will not be secured until both the equity issue and a deal with the bondholders are in place,” he said. “But the agreement with the banks is obviously a big and important step in the right direction. The deal is also important because it demonstrates that our banking partners have faith that the company in the longer term will be a profitable and good customer. None of the offshore shipping companies will get through the extreme crisis we are in now without their lenders on board.”
According to the deal with the banks the Fosnavaag-based company will have to finalize a similar deal with the bondholders before the end of January, and 200 million NOK in new equity before March 15.
The Sævik family, which owns 51 percent of the company, has guaranteed for 102 million NOK ($11 million) of the equity issue through their holding company Havila Holding AS.
Work on the agreement has been going on for a few months. The main principle for the refinancing deal is that each creditor group shall be treated equally and that the creditors shall contribute according to the maturity date of the debt. The principles shall apply equally to banks and bondholders.
“No group will get precedence,” said Sævik. “Everyone has to contribute. The shareholders too. In my view, and as the board of Havila Shipping sees it, this is necessary for the company to get through the next few years. If we can reach a deal with the bondholders on similar terms, we can feel safe that we will get the company through this extreme situation, and that the contributors, over time, in total will get a good outcome from this crisis.”
Both the banks and Havila Shipping agrees that the deal is robust enough to withstand even the bleakest predictions for how severe the crisis will be. The deferment of final maturity date until June 30, 2020, and December 31, 2020, will give the company enough time to refinance the debt in a market which is expected to be improving.
“It has been very tough negotiations before we reached an agreement. There is no reason to hide the fact that the deal reflects the very challenging times for the company. It will be tough going from here for everyone connected to the company, as shareholder or employee,” said Sævik.
Norwegian Companies Struggle
Norwegian offshore services companies face a bleak year ahead as contracts disappear and financing options dwindle in the face of weak global crude prices.
They could increasingly be forced to sell or write down the value of assets, cut jobs and tap shareholders for cash to weather the downturn, according to industry experts.
This would herald more pain for Norway, where the overall oil sector accounts for about a fifth of the economy and unemployment is rising.
Oil firms like Statoil, which offshore shipping companies rely on for business, have slashed costs and projects to cope with a 60-percent plunge in crude prices since June last year.
The effects of the oil price drop have been underlined by supply shipowners in recent weeks. Late last year Deep Sea Supply said it had taken 10 platform supply vessels out of service - out of its total fleet of 39 ships. Days later, World Wide Supply had said it would not be able to make a scheduled debt interest payment.
And the industry's predicament could deepen this year, when oil investments in Norway are expected to fall even further. Several supply ship companies also have bond debt maturing in 2016, with more cash-raising options limited.