Bulk Invest Has A Few Weeks to Ensure Its Survival
Image Courtesy: Bulk InvestThe future of Oslo-listed bulker owner Bulk Invest ASA is highly uncertain, the company said in its financial report for the fourth quarter of 2015.
Namely, if a solution is not found with the key creditors within a few weeks, Bulk Invest will not be able to survive under the present market conditions.
“In case of a bankruptcy or a wind-down of Bulk Invest, the realizable value of assets would most likely be lower than the book values recognized in the balance sheet as of December, 31st, 2015,” the company said.
Further, in a bankruptcy scenario, the commitments for chartered vessels for future periods, would also represent a significant liability with a preliminary assessment pointing to the potential claims of about USD 250 million.
Having been faced with the continued weakening of the dry bulk shipping rates and a sharp negative cash flow from operations in January 2016, Bulk Invest ASA decided to sell its subsidiary WB Chartering in February, 2016.
The transaction gave cash proceeds of USD 16 million to the company and the brand name “Western Bulk” was included in the sale. Western Bulk ASA consequently changed its name to Bulk Invest ASA. Shortly after, some of the company’s creditors requested a legal injunction, requiring a reversal of the sale of Western Bulk Chartering AS to Kistefos Equity Operations AS. However, the company said that the alleged claims are completely unfounded and will defend itself against them.
As a result, Bulk Invest is left with the currently lossmaking charter-in contracts in Bulk Shipholding and direct/indirect investments in 1.6 vessels. In addition, the group has one vessel mortgage loan of USD 8.25 million and unsecured interest-bearing debt to WB Chartering of about USD 27 million following the sale of WB Chartering.
Bulk Invest also expects to be in breach of its financial covenants in the loan agreements and guarantees provided for certain chartered in vessels.
With a cash position that mainly consist of the USD 16 million proceeds from the sale of WB Chartering and an estimated negative cash flow of USD 4-5 million per month in the current market, Bulk Invest is depending on a full restructuring of its debt and charter-in commitments within short time to survive in the weak market.
Bulk Invest has initiated a restructuring process with its key creditors, and has implemented an almost full stop in payments including charter hire for the chartered-in vessels, and is currently only paying costs strictly necessary for its daily operation.
“If no acceptable solution for Bulk Invest with the key creditors is achieved, the basis for Bulk Invest’s continued operations will be reassessed,” the company went on to say.
