TORM Completes Restructuring Agreement

The deal sees TORM with a new $100 million working capital facility.

Danish shipping firm TORM A/S (TORM) [NASDAQ:TRMD] said today it has signed a restructuring agreement with its banks and time charter partners, and it now expects to be cash flow positive "even at the current rate levels."

The restructuring deal sees the firm with a new working capital facility of $100 million made against its vessels available until September 30, 2014, and its existing bank debt of $1.8 billion has been extended until December 31, 2016.

Payment installments on the entire bank debt have been deferred until September 30, 2014 with reduced repayments until December 31, 2016.

Interest will be paid on the new working capital facility but interest on existing debt will only be paid if TORM has sufficient liquidity to do so until at least June 30, 2014, with a potential extension to September 30, 2014.

Time Charter Partners

TORM said its time charter-in partners accepted that the existing time charter-in contracts will either be permanently changed and rates aligned to market level, or the contract will be terminated, with the firm saying it will redeliver 22 vessels ahead of the original contract schedule.

The agreement was expected to reduce average time charter-in costs of the Tanker Division for the first quarter of 2013 by 36% from $18,848 per day to $12,141 per day.

In the same period, the Bulk Division has reduced the average time charter-in costs 16% from $16,286 per day to $13,755 per day.

Under the deal, current shareholders retain 10.0% ownership, not 7.5% as the company had previously communicated, with time charter parties taking 17.3%, and banks the remaining 72.7%.

"The restructuring agreement secures TORM substantial deferral of bank debt, new liquidity and savings from the restructured time charter book," said TORM's Chairman of the Board N. E. Nielsen.

"The Company now has time to further secure the future, long-term capital structure. It has taken extraordinarily long time to reach this agreement and inflicted very high costs on the Company, but TORM will now be able to continue its business even in a continued difficult market," he added.

CEO Jacob Meldgaard said he was "extremely satisfied that an out-of-court agreement has been signed."

"It has been a long process, but I am very pleased that our long-standing time charter partners and the banks have been supportive. TORM's organization now looks forward to devoting all of its focus solely on the customers and operations again."

TORM said it forecasts a loss before tax of $350-380 million for the financial year 2012 excluding accounting effects from the execution of the restructuring, further vessel sales, and potential impairment charges.