Reuters – Emirati shipping firm Gulf Navigation may launch a $140m convertible bond deal as early as this month, if the sale of two tanker ships goes ahead as planned. National Bank of Abu Dhabi has been appointed as financial adviser, a source told IFR.
The sale of the vessels and the convertible bond issuance are part of a restructuring process set out late last year with the aim to keep the company afloat.
The first step was the disposal of the two very large crude carriers (VLCCs), and this week Gulf Navigation said it had agreed their sale to Bermuda’s DHT Holdings for $98m.
The sale is complicated by the fact that the vessels in question have been seized by creditors, but the company is negotiating with them and is confident the sale will go through.
“The buyer has a relationship with our lenders, so we don’t really foresee any issue with regard to this,” a second source said.
This deal is expected to be completed by mid-February, he said. Once the formalities are completed, the company will embark on the second stage: the issuance of the convertible bond.
The articles of the company have been amended to allow for up to 49% foreign ownership to permit anticipated share issuance upon conversion.
Together the two moves will help deal with accumulated losses of 1.103bn dirhams ($300m). The company will also write off half of those losses, it said in a statement earlier this year.
Last year, the company was obliged by UAE law to ask shareholders whether or not it should continue as a going concern, after losses exceeded 50% of the value of its share capital. The shareholder vote was positive.
Gulf Navigation, like many shipping firms worldwide, has been hit hard by a fall in tanker rates from an average of $229,484 earned per VLCC per day in December 2007 to $7,296 at the start of this year, according to London shipbroker Clarkson.