First Ship demands Indonesia's Berlian Laju returns tankers
Singapore-listed business trust First Ship Lease Trust said on Friday it had demanded the return of three chemical tankers from subsidiaries of troubled Indonesian shipping firm PT Berlian Laju Tanker, as S&P declared the company in default, Reuters reports. Berlian Laju, Indonesia's largest oil-and-gas-shipping firm, is the latest shipping firm to buckle in the face of a weak global market.
It said late last month it was freezing payments on its debt of $2 billion while it talked to creditors about restructuring its operations and finances.
"When we talk about restructuring, nothing will be exactly as planned," the firm's finance director Kevin Wong told Reuters on Friday.
First Ship Lease Trust said earlier this week that some subsidiaries of Berlian Laju had defaulted on their payment obligations for the three Singapore-flagged tankers.
Ratings agency Standard & Poor's said it was cutting its long-term corporate credit rating on Berlian Laju to "D" from "CC".
"The downgrade follows our confirmation that BLT has failed to make ship-lease payments to at least one company," said S&P credit analyst Vishal Kulkarni. "A failure to honour contractual financial obligation constitutes a default."
S&P said it believed the company was likely to fail to honour other financial obligations, such as interest payments and debt repayments, in the days ahead.
DEFAULT EXPECTED
Berlian's Wong told Reuters that the move by S&P was expected. "So far creditors have been supportive," Wong said.
The firm's 2014 bonds, which were cut to "D", were trading unchanged at 25.5/27.5 on Friday, after having fallen from around 40 in early January.
"That has been a level for some time. It is already at a level where people are awaiting a restructuring," said a Hong Kong-based credit trader, adding markets had already factored in a default before S&P's decision.
The company said on Jan. 27 it had decided to freeze repayments on all of the company's bank loans, bonds and payments on ship leases and included similar obligations of its other subsidiaries, save for PT Buana Listya Tama Tbk.
The biggest creditors for a $685 million loan facility to Berlian Laju are DNB Asia with $200 million, Nordea Bank AB with $120 million and Standard Chartered Bank with $115 million, Thomson Reuters data shows. Others include BNP Paribas, ING Bank NV and SEB.
Timur Sukirno, a bankruptcy lawyer at Hadiputranto, Hadinoto & Partners in Jakarta, said that either the company or a group of its creditors can apply to the courts in Indonesia for a suspension of payments, where all assets are frozen allowing the company to enter into a negotiation with its creditors.
If creditors do not agree to a suspension of payments then the company could go into bankruptcy. However, if lenders have specific assets, they may try unilaterally to get those, he said, in comments that back First Ship's legal right to demand the return of the tankers.
SINKING SHIPPING
The oil tanker freight market is struggling through a slump brought about by the global downturn and weak freight rates on the one hand and higher shipping fuel costs on the other.
However, sources have said that Berlian Laju's problems were compounded by high debts following the expansion of its chemical tanker business at the peak of the shipping market in 2007.
Berlian Laju's total outstanding debt was $1.9 billion as of the company's September financial statement. About $418 million in scheduled principal payments are due this financial year.
The Indonesian firm joins a growing list of companies struggling with the downturn in the tanker freight market.
General Maritime Corp, a crude oil and refined petroleum products shipper based in New York, filed for Chapter 11 bankruptcy protection in November.
The world's largest independent oil tanker operator, Frontline of Norway, was forced to restructure and split in two.
Danish shipping company Torm A/S has said it is trying to reschedule debt.
Lenders are also growing increasingly wary of shipping finance as credit tightens globally on worries that the euro area debt crisis could push the world economy into another severe downturn.
It said late last month it was freezing payments on its debt of $2 billion while it talked to creditors about restructuring its operations and finances.
"When we talk about restructuring, nothing will be exactly as planned," the firm's finance director Kevin Wong told Reuters on Friday.
First Ship Lease Trust said earlier this week that some subsidiaries of Berlian Laju had defaulted on their payment obligations for the three Singapore-flagged tankers.
Ratings agency Standard & Poor's said it was cutting its long-term corporate credit rating on Berlian Laju to "D" from "CC".
"The downgrade follows our confirmation that BLT has failed to make ship-lease payments to at least one company," said S&P credit analyst Vishal Kulkarni. "A failure to honour contractual financial obligation constitutes a default."
S&P said it believed the company was likely to fail to honour other financial obligations, such as interest payments and debt repayments, in the days ahead.
DEFAULT EXPECTED
Berlian's Wong told Reuters that the move by S&P was expected. "So far creditors have been supportive," Wong said.
The firm's 2014 bonds, which were cut to "D", were trading unchanged at 25.5/27.5 on Friday, after having fallen from around 40 in early January.
"That has been a level for some time. It is already at a level where people are awaiting a restructuring," said a Hong Kong-based credit trader, adding markets had already factored in a default before S&P's decision.
The company said on Jan. 27 it had decided to freeze repayments on all of the company's bank loans, bonds and payments on ship leases and included similar obligations of its other subsidiaries, save for PT Buana Listya Tama Tbk.
The biggest creditors for a $685 million loan facility to Berlian Laju are DNB Asia with $200 million, Nordea Bank AB with $120 million and Standard Chartered Bank with $115 million, Thomson Reuters data shows. Others include BNP Paribas, ING Bank NV and SEB.
Timur Sukirno, a bankruptcy lawyer at Hadiputranto, Hadinoto & Partners in Jakarta, said that either the company or a group of its creditors can apply to the courts in Indonesia for a suspension of payments, where all assets are frozen allowing the company to enter into a negotiation with its creditors.
If creditors do not agree to a suspension of payments then the company could go into bankruptcy. However, if lenders have specific assets, they may try unilaterally to get those, he said, in comments that back First Ship's legal right to demand the return of the tankers.
SINKING SHIPPING
The oil tanker freight market is struggling through a slump brought about by the global downturn and weak freight rates on the one hand and higher shipping fuel costs on the other.
However, sources have said that Berlian Laju's problems were compounded by high debts following the expansion of its chemical tanker business at the peak of the shipping market in 2007.
Berlian Laju's total outstanding debt was $1.9 billion as of the company's September financial statement. About $418 million in scheduled principal payments are due this financial year.
The Indonesian firm joins a growing list of companies struggling with the downturn in the tanker freight market.
General Maritime Corp, a crude oil and refined petroleum products shipper based in New York, filed for Chapter 11 bankruptcy protection in November.
The world's largest independent oil tanker operator, Frontline of Norway, was forced to restructure and split in two.
Danish shipping company Torm A/S has said it is trying to reschedule debt.
Lenders are also growing increasingly wary of shipping finance as credit tightens globally on worries that the euro area debt crisis could push the world economy into another severe downturn.