Havila Reports Progress to End Russian Financing but Defers Deliveries
Havila Kystruten has once again delayed the delivery and introduction of its last two cruise ships as the company continues to make progress in its efforts to extricate itself from the unintended consequences of the financial sanctions against Russian institutions. Havila has been working for 13 months to resolve the situation, forced to delay delivery of its third ship for six months as the process plays out.
The company reported in a stock exchange filing today, May 19, that it has now received the licenses it was seeking in order to proceed with the planned refinancing. Under the plan approved by the court, Havila will refinance its operations and funds will be placed in frozen accounts held for the Russian financial institution GTLK, which had financed the construction and was to have been the owner of the four cruise ships. Using a structure common in the shipping industry, Havila was to have operated the ships under long-term charters from subsidiaries of the financial institution with an option to purchase the ships. This, however, went array after the sanctions were put in place in April 2022 preventing the company from making payments to a Russian company. They were forced to suspend service for weeks a year ago while working out the first of the arrangements.
With the court-approved plan, Havila sought a license from the Irish Central Bank which it received at the end of April. They also sought a license from the American authorities, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury, which administers and enforces economic and trade sanctions, as well as the UK’s Office of Financial Sanctions Implementation (OFSI). The licenses permit individuals and institutions in those countries to participate in the refinancing without fears of also becoming entangled in the sanctions.
Delays in obtaining the licenses also meant Havila had to extend the long stop provisions contained in the English court orders for settlement of the existing debt. The UK High Court has granted those applications and extended the deadlines by two months, until June 30, 2023.
“Obtaining the necessary licenses has taken longer than anticipated, and there is not enough time to complete the financing that ensures the ships can be put into operation as scheduled,” Havila however writes in its stock exchange filing. Plans had called for the Havila Polaris to enter the Norwegian coastal trade between Bergen and Kirkenes on June 23. The last of the company’s vessels, Havila Pollux, was due to follow a week later on June 29. The filing did not announce new dates for each ship’s introduction.
The passenger ships are being built at the Tersan shipyard in Turkey. The Havila Polaris was completed in late 2022 but due to the legal issues, the company has been forced to differ its delivery. The fourth coastal cruise ship, Havila Pollux, the company reports has completed its sea trials in Turkey, and only final finishing touches remain before the ship is ready for delivery.
For the time being, the company continues to operate its service with its first two cruise ships. At the end of April, the company reported it had 50 percent of its capacity for all four ships sold out for the year.