Summary
The comparison figures for first quarter 2011 are stated in parenthesis.
On 30 April 2012 Nordic Shipholding sold its Chemical vessels and the entire organization. If nothing else is mentioned, the discussions of financial data relates to the continuing business. Following the sale Nordic Shipholding’s activities consist of six product tankers.
In the first quarter of 2012, the Time Charter Equivalent (TCE) revenue for continuing operations increased by USD 1.7 million to USD 7.3 million. Even though there was an increase in TCE revenue in the first quarter of 2012 the low freight rates, which have dominated the Company’s respective markets the previous years, remained at unsatisfactory low levels. Due to continued focus on costs, EBITDA for continuing operations was USD 3.4 million in Q1 2012, up from USD 2.6 million in Q1 2011.
Year to date, the cash flow for continuing operations was USD 1.0 million primarily deriving from operating activities. The comparable figure for Q1 2011 was USD 1.6 million.
For 2012 Nordic Shipholding maintains the expectations for continuing operations of TCE revenues in the region of USD 23 – 27 million, with an EBITDA of USD 7 - 10 million. The result before tax including discontinued operation is expected to be a loss of USD 11 to 15 million before any write-downs on vessels, goodwill or other assets and before an estimated book loss from the sale of the chemical tanker activities of USD 3-5 million.
As mentioned in the annual report for 2011, the Company has been striving to obtain a long-term solution to the financial challenges deriving from operating in depressed markets for a prolonged period of time. An important step in that effort was taken on 27 March 2012 when Nordic Tankers and Triton reached a conditional agreement on the divestment of Nordic Tankers’ chemical tanker operations for a price of USD 30 million subject to approval by the Annual General Meeting on 20 April 2012.
The Annual General Meeting on 20 April 2012 approved the divestment unanimously, hence the work related to the completion of the divestment could continue and was successfully finalized when the deal was completed on 30 April 2012. The divestiture of the chemical tanker activities comprises a sale of all nine owned chemical tanker vessels, the six in-chartered chemical vessels, all contracts of affreightment and the entire organization of Nordic Tankers.
The divestment price of USD 30 million was split into two:
- USD 10 million was applied to reduce the bank debt in the six product tankers remaining in Nordic Shipholding, and
- USD 20 million was lent to the company acquiring the nine owned chemical tanker vessels. The loan is also called a vendor note and is subordinated to the bank debt in the nine vessels and is repayable in 2017 or potentially later. The vendor note will accumulate rolled-up interest of 7.5% annually. Certain clauses in the vendor note related to situations where additional equity injections in the buying company will be needed in the future may lead to the value of the vendor note being materially diluted, however, no such situation is currently expected. Nordic Shipholding has entered into an agreement with Clipper which gives Nordic Shipholding an option to assign the vendor note to Clipper during 2012, against termination of two loans towards Clipper (related to payment for the organization acquired in 2010 and a loan received during 2011). The debt to Clipper is about USD 15 million. Nordic Shipholding can only assign the vendor note to Clipper if Nordea and Danmarks Skibskredit approve the assignment.
This quarterly report covers the period 1 January to 31 March 2012, and consists of figures related to both the chemical segment (discontinued operations) and product segment (continued operations). From 1 May 2012 and going forward the figures will only relate to the remaining product tanker activities as described above.
The divestment has given the company more time to achieve a permanent solution to its financial challenges. The progress for establishing a long term funding is proceeding according to plan. However, if new equity is not injected and the moratorium granted is not extended beyond 31 March 2013 or the market does not improve significantly, the Company may be unable to honor its commitments towards its banks, which consequently may result in loss of shareholders’ equity.
For the full interim report Q1 2012, please see attached.
