By MarEx 2016-02-08 20:54:06
In a record-breaking bear market, operator Western Bulk has been working to improve its balance sheet and move forward – but on Monday it announced that its majority shareholder has backed away from an earlier deal to restructure the firm’s obligations, leaving Western’s future uncertain.
In November, Western reached a deal with its bondholders for easing of financial covenants, including significant reductions in the firm’s minimum book equity ratio and equity amount.
The deal required the sale of at least $10 million worth of shares, subscribed and allocated by the end of March – and the participation of the firm’s largest shareholder, Kistefos, which promised to buy those shares and to come up with an additional $10 million in equity. Kistefos is wholly owned by the investor Christen Sveaas, who is also chairman of Western Bulk.
On February 8, Kistefos completed the purchase of a Western chartering subsidiary and discharged its equity commitment by making an initial payment to Western of $10 million. But in addition to the much-needed capital infusion, Western Bulk had some unfortunate news.
“Kistefos AS has informed the Company that it given the current circumstances considers that its subscription and guarantee undertaking no longer applies” – indicating that a key component of Western’s bond deal has fallen out of place, and it may soon find itself in breach of its covenants.
Western is still looking at the possibility of a rights issue – a sale of shares to existing shareholders – but without the participation of Kistefos, which holds a 60 percent stake, the firm does not sound optimistic. “[Western Bulk] will initiate dialogue with its creditors to explore and pursue potential solutions. If no acceptable solution . . . with the remaining creditors is achieved, the basis of [Western’s] continued operations will be reassessed,” the company said.