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Torm seeks waiver as it heads for covenant breaches

Torm seeks waiver as it heads for covenant breaches
Torm recorded a first quarter loss of $222m as a $195m impairment charge pushes the company into negative equity and, it expects, out of compliance with its debt covenants come June.

The $195m impairment is at the high end of forecasts on the fallout from Danish Ship Finance triggering the sale of 13 of Torm's tankers to Oaktree capital management, an option the creditor held that was due to expire in July under the terms Torm's restructuring.

At the end of March, the company's equity stood at -$103.2m as liabilities of $1.8bn tipped the scales on assets of $1.7bn.

"With the current forecasts on freight rates, Torm expects to be unable to comply with the covenant on minimum interest cover when tested as at June 2014, however, Torm has already approached the lenders and expects to obtain a covenant waiver in advance of the test," the board stated in Torm's earnings release.

The company's total interest bearing debt stood at $1.6bn at the end of the first quarter.

"Torm is in constructive dialogue with longstanding and new lenders regarding a long-term capital structure and expects them to remain supportive," the board concluded.

While a 98% jump in rates for panamaxes pushed the company's bulk division to narrow its EBITDA loss from $11m to break even in Q1 2013, tankers suffered as MR spot rates dropped 14% to $15,207 per day, cutting EBITDA from $46m in Q1 2013 to $20m in the first quarter 2014.

Torm revised its forecasts a pre-tax loss of $260m to $290m dollars for the full year 2014, from the $70m to $100m loss it forecast at the end of 2013..