Avance Gas has reached a comprehensive agreement with its lending banks. For a 2.5 year period commencing on January 1 next year, amortisation payments on both of the company’s bank loan facilities will be reduced by 50%, deferring a total of $55m of amortisation payments over the period.
“To further reduce uncertainty in a potentially prolonged weak freight market,” Avance said in a release it has been agreed with the lending banks that the minimum book equity covenant will be reduced from $250m to $200m and the minimum equity ratio covenant will be reduced from 30% to 25% during the deferral period. It has further been agreed that the minimum value to outstanding loan covenant will be reduced from 130% to 110% from the end of this year until March 31 2019, following which there will be a gradual step-up towards March 31 2020, when the original covenant level of 130% will be reinstated.
The interest margins on the bank loan facilities will be increased with 25 basis points, to 225 basis points on the $200m facility and 275 basis points on the $450m facility. A cash sweep mechanism will commence in Q3 2019.
The company will also be able to cancel the amendment agreements at zero cost once original maturity schedules and original covenants are restored.
“The amendment of the bank loan facilities,” Avance said in a release, “is a proactive step to strengthen the company’s balance sheet and prepare for a prolonged market downturn, while retaining an attractive and levered exposure to the LPG freight market.”
The agreement with the lending banks is conditional upon the company raising a minimum of $55m of new equity something it is likely to achieve via a private placement.
Avance Gas reported a net loss of $60.7m in Q3 2016, which included an impairment charge of $45.3m related to the VLGC fleet and a goodwill impairment of $1.9m. This compared to a net loss of $14.5m in Q2 2016.