Under pressure Norwegian owner Western Bulk is changing its name to Bulk Invest and holding off all payments to creditors as a severe liquidity crunch bites.
The ceo of the company, Jens Ismar, told Splash the payment hold up was temporary, pending the completion of a large change in the company’s organisation announced earlier this week.
On February 1, Western Bulk sold its subsidiary Western Bulk Chartering (WBC) to Kistefos AS, a Norwegian private investment firm led by Christen Sveaas, who is chairman of the Oslo-listed shipping group.
WBC’s enterprise value is $47m, but Bulk Invest will receive just $16m as a cash consideration for the business unit. WBC charters in around 160 ships, predominantly supramaxes, while Bulk Invest has 23 ships on its books.
Kistefos, which controls around 60.4% of Western Bulk shares, will assume WBC’s treasury bonds and its outstanding debt of NOK271m ($31.36m) under its NOK300m ($34.71m) senior unsecured bond.
“Once the transaction has been completed we will enter discussions with all stakeholders to see what restructuring can take place,” Ismar told Splash.
The company warned this week that its shipholding division is suffering negative cash flow market rates have dropped in the first weeks of 2016 with the division having a projected cash burn of $4m to $5m a month.
“Unfortunately there does not seem to be a bottom,” Ismar said of the current plight of the dry bulk markets, with the Baltic Dry Index standing at a record low of 303 points as of Wednesday afternoon. “I can’t see it carrying on all year or else we’d see the majority of the global fleet laid up,” he added.
Ismar, in the past, has admitted he got the market wrong. Decisions to expand in 2013 and 2014 have come back to haunt the firm.
For instance, Western Bulk began building up its panamax business in 2013, which gathered pace in March 2014 when the company acquired Oslo-based K2 Shipping. Just over a year later it was forced to ditch its panamax focus with huge losses.
Western Bulk shares were on NOK0.50, up 6.38% in early trading in Oslo today.