BDI Hits 369, Mercator Sells Its Bulkers

Prem
File image courtesy Mercator Limited

By MarEx 2016-01-18 19:34:21

In trading Monday, the Baltic Dry Index fell to 369 points, almost 100 points below the record low set in 1985, reflecting continued distress in the bulk carrier market amidst an oversupply of ships and falling commodity demand.

Citing the poor market conditions, on Monday Mercator Limited's board approved a proposal to exit its bulker business, operated by subsidiary Mercator Lines Singapore (MLS). It joins the ranks of many other firms looking to scale back exposure to the sector. Mercator Limited has already selected an agent to find buyers for MLS' remaining ships, all between 70,000 and 90,000 dwt.

MLS has lost money for Mercator every year for the last three years, including a loss of $125 million in 2015.

“[MLS'] operations are currently consolidated in the financial accounts of Mercator India and adversely affecting its consolidated performance,” Mercator said in a statement. “The bulk carrier business has been the worst affected by the downturn in the shipping cycle, with the [BDI] having collapsed . . . and not showing signs of early revival in the future."

Mercator may have also faced pressure for the sale from legal proceedings. In a simultaneous announcement sure to please its creditors, MLS issued a statement to the Singapore exchage saying that a court has placed a judicial manager at the company's helm.

"The Court Order appointing Yit Chee Wah as judicial manager has been issued on 18 January," the statement said. "The judicial manager intends to evaluate all of the available options in order to preserve the value of the company's assets for the benefit of its creditors."

Creditor HSH Nordbank had filed a motion to appoint a judicial manager in September.

MLS announced the resignation of CEO Shalabh Mittal in December, and said that it had finalized the forced sale of three bulkers – the Kesari Prem, Gauri Prem and Sri Prem Aparna – to settle outstanding debts.

The vessels were reportedly sold to companies associated with its creditors for a total of about $15 million in retired debt.

Shalabh Mittal is the son of Mercator Limited founder H.K. Mittal; Shalabh’s brother Aayush sits on the company’s board. Together with the Agarwal family, related by marriage, the Mittals control a 40 percent stake in the company. 

Mercator said that its other business sectors are performing satisfactorily. The company has a vertically integrated coal operation, and its oil and gas holdings include onshore interests in India and an offshore development in the Gulf of Guinea. Mercator also operates a tanker fleet and the second largest dredging operation in India, with nine owned dredgers.