Havila Shipping enters financial restructuring warning of 'severe challenges'

Havila said it entered into an agreement with secured and unsecured bank lenders to reduce amortisation for three years, postpone maturities of both secured and unsecured debt and replacing all covenants, subject to bondholder approval. The company will also undertake new equity issue of a minimum of NOK200m ($22.5m) issue of new equity of which NOK102m will be guaranteed by Havila Holding.

Explaining the rationale behind the debt restructuring Havila said: “The company foresees severe financial challenges for the period 2016-2018, and has several debt maturities coming up over the next months, of which it has no readily available means of refinancing.

“Further, cash flow from operations is not sufficient to serve the current amortisation schedules, and the company does not expect that the market will improve materially in the short to medium term.”

The proposed restructuring includes the company’s annual run rate on amortisation reduced from NOK530m to NOK150m for 2016 – 2018 and all secured debt to mature on 30 June 2020 and unsecured debt 31 December 2020. The aim is to give the company a sufficient liquidity buffer to operate through to end of 2018 even given the current downturn.

Havila painted a grim picture of the state of the offshore market and its outlook. “The market for offshore vessels is characterised by supply far exceeding demand. As a consequence of low fleet utilisation and rates achieved, many vessels in this segment have generated revenues below operating expenses. Further, vessel valuations are expected in general to extend its decline.”

Havila reported a NOK72.3m loss for the third quarter of 2015.