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Pressure mounts on Gulf Navigation

Pressure mounts on Gulf Navigation
Dubai: Shares in Gulf Navigation, a Dubai-based oil and chemical tanker shipping company, plummeted after it reported a doubling of annual losses. Company auditors warned its future depends upon the willingness of its lenders to keep it afloat.

Shares fell as much as 9.8% to 22 fils each, their lowest level in more than a year. The company's stocks rallied later in the trading day, but closed down 8.2% at 22.4 fils per share.

The market is undergoing a “correction,” Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities told media. Gulf Navigation stock also declined after saying the shipping industry “will continue to suffer” this year, he said.

The company posted a AED147.8m loss ($40m) in 2012 compared with AED72.7m a year earlier, following write-downs of AED89.7m in goodwill incurred as part of its initial public offering.

Auditors warned that accumulated losses of AED477.6m mean Gulf Navigation's future as a going concern "is reliant upon the continued availability of external debt financing", reiterating that a breach of its terms of agreement gives lenders the right to declare a default and call in all outstanding debts.

Gulf Navigation's chairman Abdullah Al Shuraim said "the company continues to work very closely with our lenders to ensure a new agreement can be reached to remedy the breach of its covenants within its current lending agreements", adding that he expected progress in talks during the current quarter.

It was "confident that a decision will be reached with the lenders which will avoid a demand for immediate repayment of the loans and ensure compliance with the loan agreement", the company said.

The company is preparing for a potential arbitration hearing in London against a Chinese shipyard over disputed payments of AED106.5m, which Gulf Navigation hopes to claw back.

The stock was traded heavily and led declines on the Dubai Financial Market General Index, which fell 0.8% to 1,829.24 on Sunday March 31.Gulf Navigation, which has gone through six chief executives in as many years, has not turned an annual profit since 2009 and began debt restructuring talks in 2011.