Summary
Nordic Shipholding sold its chemical tanker activities and entire organization in Q2 2012 to the private equity fund Triton. If nothing else is mentioned, the discussions of financial data relate to the continuing business. After the sale, Nordic Shipholding’s activities consist of six product tankers – 1 LR1 (75,000 dwt) vessel and 5 Handy Size (35-38,500 dwt) vessels.
After the divestment to Triton, the focus has been to restructure the Company aiming to create a positive future cash flow from operations. Nordic Shipholding is today a pure tonnage provider and general management has been contracted to Tankers Inc. Holdings A/S. Therefore management positions in Nordic Shipholding were closed in July 2012, and costs of up to USD 1 million will be granted as compensation. These compensation costs were provided in Q3 2012, however, the full cash flow effect will not materialize until April 2013.
In an effort to keep costs low, because of the Company’s financial situation and the very simple and transparent organization, external communication such as website updates and shareholder newsletters have been scaled down to a minimum. While acknowledging this may affect the communication flow to shareholders, it is a necessity. Nordic Shipholding is focusing on creating a slim and efficient operation to regain profitability.
Year to date, the Time Charter Equivalent (TCE) revenue increased by USD 1.1 million from USD 18.6 million in 2011 to USD 19.7 million in 2012. The low freight rates, which have dominated the Company’s market segments during the previous three years, remained at unsatisfactory low levels. However, at the end of Q3 rates increased in most of the product tanker segments, continuing into the beginning of Q4. Year to date EBITDA was USD 4.8 million, down from USD 5.5 million in 2011. The result after tax for continuing operations was a loss of USD 7.2 million. Cost relating to the divestment of the chemical tanker activities amounted to approx. USD 1 million.
For 2012 Nordic Shipholding maintains the expectations as announced in the Q2 2012 interim report. The expectation for its continuing operations of TCE revenues is in the region of USD 23 – 27 million, with an EBITDA of USD 7 - 10 million. The result before tax for the continuing operations is expected to be a loss of USD 7 to 12 million before any write-downs on vessels, goodwill or other assets.
The result before tax including discontinued operation is expected to be a loss of USD 15 to 20 million including realised book losses from operation and sale of the chemical tanker activities of USD 8.3 million but before any write-downs on other vessels, goodwill or other assets.
The divestment of the chemical tanker business was approved at the Annual General Meeting on 20 April 2012 and the divestment was completed on 30 April. The divestment price of USD 30 million was split into two:
- USD 10 million in cash that was applied to reduce bank debt in the product tankers remaining in Nordic Shipholding, and
- USD 20 million that was lent to the company acquiring the chemical tankers.
The divestment has given the Company time to try to find a permanent solution to its financial challenges and the board is actively pursuing a number of different options such as a prolonged moratorium, merger, sale and a capital increase. The process for establishing a long-term solution is proceeding according to plan. However, if new equity is not injected and/or the moratorium granted is not extended beyond 31 March 2013, the Company may be unable to honour its commitments towards its banks, which consequently may result in loss of equity or bankruptcy. However, the company is in dialogue with its banks and expects to find a solution creating value for lenders and shareholders.
However, end Q3 book value of the Company’s vessels was USD 162.6 million versus a broker estimate approx. USD 30 million below book value. In addition the Company calculates the net present value of the vessels’ expected future earnings, which shows a higher value than the book value and therefore no write-down has been made. For further information, see note 3. Should the Company be forced to sell the remaining product tankers in a distressed sale, the equity will be lost.
