Fredriksen set to come to rescue of Golden Ocean

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Tony Gray - Wednesday 4 March 2009

 

JOHN Fredriksen has stepped in to support financially-pressed Golden Ocean with an offer to buy the majority of the dry bulk company’s $200m bond issue. 
His intervention could help to prevent Golden Ocean being in breach of a crucial covenant which would result in the company being unable to utilise fully or draw down committed bank financing. 
Mr Fredriksen’s Hemen Holding, Golden Ocean’s largest shareholder, is undertaking a conditional offer to buy two-thirds of the outstanding bonds. 
Hemen’s offer is pitched at 30% of the face value of the bonds plus accrued interest. 
On this basis, Hemen’s total spending could be more than $40m, although it is not known whether the company has an existing holding of Golden Ocean’s bonds. 
If Hemen succeeds in reaching a two-thirds position, it intends to call a bondholder’s meeting in order to remove the market adjusted equity ratio in the bond agreement. 
“Hemen hopes that the cash offer is perceived as a constructive contribution by Golden Ocean’s largest shareholder to create a possible basis for continued operation in Golden Ocean,” Mr Fredriksen’s company said. 
Hemen warned that the offer, which is conditional on acceptances being received for at least two thirds of the bond issue, was “the only and final offer” it would put forward. 
During the past week, the bonds have been trading at 15%-20% of their par value, and thus Hemen’s offer represents a substantial premium. 
Fearnley Fonds described Hemen’s moves as “a first, positive, step in a restructuring plan, which will lead to the company being able to utilise committed bank debt”. 
DnB NOR Markets said that if Hemen’s offer was successful it would “significantly reduce the default risk in Golden Ocean”, which in any case it believes has been “massively” exaggerated. 
However, it also pointed out that the offer does not provide any liquidity to Golden Ocean, leaving issues still to be resolved relating to newbuilding instalments. 
The company has outstanding unfinanced capital commitments of $705m over the next three years. 
Golden Ocean last week said it had only weeks to stave off the threat of insolvency following the collapse in bulk carrier values and counterparty failure in charters. 
The company warned that it could run out of cash to meet its obligations and was in urgent need of a financial restructuring package to be in place by the end of this month.