Amidst a prolonged weak market, product tanker owner Concordia Maritime had warned investors of the risk it could breach its working capital covenant with lenders
Concordia said it had reached a conditional agreement for a time charter of its 10-vessel fleet of P-max tankers by a Stena Group entity and new loan terms on an existing US$114M loan.
The time-charter arrangement could be with Stena Bulk "or a nominated company within the group of companies," a statement from Concordia said.
The US$114M loan on eight of Concordia’s tankers is due at the end of 2024 and Concordia said it had secured an additional guarantee from Stena Sessan for a payment of US$10M on amortisation costs.
Both conditions were required by the banks underwriting the renegotiated loan, and the statement from Concordia explained that the arrangement would give the company a chance to find stability as market conditions began to improve.
"The weak tanker market during the past six years has entailed financial challenges for Concordia, as stated in the interim report for Q1 2021. The term sheet, the time charter and the guarantee mean that Concordia’s imminent lack of liquidity is handled," Concordia said.
"The time charter ensures a stable income for the coming five years. Furthermore it gives Concordia a possibility to profit from an, as previously stated, expected improved market through the profit sharing mechanism under the time charter."
In an opinion story published on Riviera’s website in May, Concordia Maritime CEO Kim Ullman said he expected a structural strengthening of the tanker market from the second half of 2021.
"Looking at the longer-term development of the market, we maintain our belief that it will return to balance. One of the main drivers is rising oil consumption. The world currently consumes about 96M b/d, but only produces about 94M b/d. This is what has finally brought stocks down to the five-year average... In addition, we also expect to see oil demand gradually continuing to rise from 96M b/d to 100M b/d as we enter the second half of 2021," Mr Ullman predicted.
Concordia said it has also negotiated the right to sell off some or all of the fleet involved in the charter agreement, a move it said would give the company the chance to take advantage of a stronger market.
Concordia said the financial manoeuvring would require approval by shareholders at an extraordinary general meeting which is expected to take place on 12 August 2021.
Because the financial arrangements are largely internal, the majority-owning Sten A Olsson family will not have a vote. The Olsson family’s holdings include a position as Concordia’s major shareholder through Stena Sessan, holding 52.16% of the total amount of shares and 72.73% of the votes.
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