Norway’s offshore shipowner Havila Shipping doesn’t see any improvements in the offshore supply vessel sector any time soon, and expects “severe” financial challenges for the period of 2016-2018.
The company on Tuesday said the downturn in the offshore market and expected continuing fall in market values and activity going forward has, as for other players in the sector, had a major impact on the company.
The market for offshore vessels is characterized by supply far exceeding demand, Havila said, adding that, as a consequence of low fleet utilization and rates achieved, many vessels in this segment have generated revenues below operating expenses. Further, vessel valuations are expected in general to extend its decline.
“The Company has taken measures to adapt to the prevailing market conditions, including as previously reported by lay up of vessels and other cost reducing efforts which will have full effect in the financial statements from Q1 2016 and onwards,” Havila said.
The shipowner expects to face severe financial challenges for the period 2016-2018, and has several debt maturities coming up over the next months, of which it has no readily available means of refinancing. Further, Havila says, cash flow from operations is not sufficient to serve the current amortisation schedules, and the company does not expect that the market will improve materially in the short to medium term.
Thus, Havila has negotiated with its bank lenders and entered into an agreement setting out the main terms and conditions of the refinancing the company has been working towards.
Havila has entered into an agreement with its secured and unsecured bank lenders to reduce amortisation for three years, postpone maturities and replace all existing covenants, subject to bondholder approval and a minimum NOK 200 million equity issue.
“If and when implemented, the refinancing will reduce interest payments and amortisations to a more manageable level considering the prevailing circumstances. The Refinancing is intended to be sufficiently robust to sustain also a low case scenario with a minimal risk to covenants through 2018, and more manageable risk of covenant breach thereafter. Postponement of maturities until 30 June 2020 ensures sufficient time for the Company to refinance in an expected recovering market,” Havila said.
Lost charter in Brazil
In a separate statement on Tuesday, Havila said it had lost its platform supply vessel charter with Petrobras in Brazil.
Petrobras terminated the charter for the the Havila Princess vessel. Havila said the contract was blocked by local tonnage and the certificate needed for operation in Brazil was not renewed. The terminated contract was valid until September 2017. The 73.4-meters long Havila Princess is a platform supply vessel, delivered in 2005 by Kleven Shipyard.