One of TORM’s banks has recently exercised the specific option rights granted in connection with the Restructuring Agreement. This entails a sales process for the four MR product tankers financed by this bank facility. The vessels are TORM Alexandra (2010), TORM Agnete (2010), TORM Arawa (2012) and TORM Anabel (2012).
Consequently, TORM has concluded an agreement in principle to sell the four MR product tankers to entities controlled by Oaktree Capital Management (Oaktree). The agreement is expected to be implemented in the near future, pending internal approval processes with the parties involved and other relevant parties. According to the agreement, Oaktree will place the four vessels plus two additional vessels under TORM’s commercial management in a revenue sharing scheme and utilize TORM’s integrated operating platform for technical management of the four vessels. TORM will retain an upside potential through a profit split mechanism if Oaktree generates a return above a specified threshold.
“With one bank having exercised its option rights regarding the four vessels, I am very pleased to have forged this close partnership with a strong strategic investor in the product tanker space. Through our strong operational platform, we have succeeded in maintaining the four vessels associated with TORM. We have also secured that two additional vessels will join our revenue sharing scheme,” says CEO Jacob Meldgaard.
The four vessels will be delivered to Oaktree during the first half of 2014.
The transaction is expected to lead to an impairment of USD 55m, which will be recognized in the financial statements in the fourth quarter of 2013, where the vessels will be treated as assets held for sale. Upon completion of the transaction, TORM’s liquidity position is expected to improve by USD 13m and the associated vessel financing will be fully repaid thereby reducing the Company’s debt by USD 107m.
Following the sale, TORM’s owned fleet will consist of 56 product tankers and two dry bulk vessels.
For the full year 2013, TORM maintains the forecast of a positive EBITDA of USD 90-100m, but revises the forecast to a loss before tax of USD 165-175m. The forecasts are before any potential further vessel sales or impairment charges. TORM expects to remain in compliance with the financial covenants for 2013. In addition, TORM expects to be operational cash flow positive after all interest payments.
TORM, December 9, 2013