Thursday, February 12, 2009
Golden Ocean Group tenders delivery notice regarding sale of panamax vessel M/V Bellflower
Thursday, 12 February 2009
Golden Ocean Group Limited has tendered delivery notice in connection with the sale of the Company's panamax vessel M/V Bellflower. The agreed sales price is $76 million. Golden Ocean has at the same time declared the purchase option on the vessel at a strike price of $21.3 million. The Buyer has informed Golden Ocean that they do not have the financial resources to take delivery of the vessel. The Board of Golden Ocean has considered their available options including their possibility to pursue the claim through legal recovery, both against the Buyer as well as the Buyer's owners. The timing and financial backing for a potential award made such a route uncertain.
In this process the counterpart has come back with a proposal to buy the vessel for a reduced price of $50 million. The new agreement includes a $10 million second priority financing with 7 years maturity to rank after a first priority mortgage maximized to $18 million. This price is estimated to reflect a significant contribution from the Buyer above the current market value of the vessel. The new sales agreement is based on the new ultimate owners bringing new equity to the Buyer. The Board agreed in this difficult situation to accept the new contract and the vessel is expected to be delivered to the new owners in March 2009. If such sale fails Golden Ocean will seek recovery under the original contract with the Buyers.
Due to financial constraints and risk of bankruptcy for one of the Golden Ocean's counterparts (Spanish cement producer), it has been agreed as follows (with reference to the press release sent out on the third of December 2007):
The Panamax vessels M/V Mulberry Paris and M/V Mulberry Wilton (both 76.500 dwt) have been redelivered to the Company from their existing charter. A cash compensation of approximately $25 million has been agreed upon for the balance period commitment (until the third quarter of 2011). Both vessels will be trading in the spot market until further notice. The loss for Golden Ocean compared to the present forward market is approximately $32.0 million with the potential for some further recovery based on a positive financial development of the charterer. The loss is sensitive to the spot earnings for the two vessels going forward.
Due to non-compliance with the terms and conditions for the sale/leaseback agreements of two Capesize vessels to be delivered from Daehan Shipbuilding, Ship Finance International Limited and Golden Ocean have agreed to terminate the agreement. The Company is in discussions with banks to replace these two financing arrangements as well as seeking financing for the 10 ships the Company presently have unfinanced.
The two breaches of contract put constraints on the Company's liquidity position and might force the Company to seek further risk capital. The Company's major shareholder has under certain conditions indicated a positive willingness to contribute to such a solution. The major condition is that the Company can agree acceptable changes in the loan documentation with its banks as well as the holders of the Company's Convertible Bonds.
A significant part of Golden Ocean's value is linked to the value of the Company's charter portfolio. As advised in the third quarter 2008 press release, Golden Ocean considers the counterparty risk to be the biggest challenge for the Company going forward.
The Company will enter into discussions with the banks to discuss potential changes to its loan agreements, among others the interpretation of the loan agreements related to the value of charter parties into the net worth calculation. The Company anticipates that similar discussions will take place with the Company's convertible bond holders. Such changes might be needed so that the Company is in compliance with existing lending facilities going forward.
Golden Ocean has also started discussions with the shipyards and other specific creditors in order to achieve reliefs in the Company's contracts and agreements. This includes, among other items, cancellations of newbuilding contracts, but as of today no agreements have been made.
The Company intends to present further information about the need for financing in the fourth quarter report to be released February 26th 2008.
Source: Golden Ocean Group
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