Offshore Headwinds Lead Havila to Restructuring

Norway-based offshore vessel owner Havila Shipping is preparing for “severe financial challenges for the period 2016-2018” as the offshore market is suffering strong headwinds.

“The market for offshore vessels is characterized by supply far exceeding demand. As a consequence of low fleet utilization 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 said, adding that the market is not expected to recover in the short or medium term.

The company said that it has several debt maturities coming up over the next months, of which it has no readily available means of refinancing.

As a consequence, Havila is undertaking a major financial restructuring and has entered into an agreement with its secured and unsecured bank lenders to reduce amortisation for three years, namely in 2016, 2017 and 2018, as well as postpone maturities and replace all existing covenants, subject to bondholder approval. Additionally, Havila will undertake a minimum NOK 200 million equity issue.

This will see the company’s annual run rate on amortisation being reduced from NOK 530m (USD 59.3 m) to NOK 150m for 2016 to 2018, and all secured debt maturity to be pushed to June 30, 2020 and unsecured debt on December 31, 2020.

The restructuring is expected to help the company maintain a sufficient liquidity buffer to operate through 2018 despite the current downturn.

The agreement is effective as of December 31, 2015.

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