Five Banks Left in TORM Negotiations

Danske Bank is reportedly seeking to divest from TORM

As Danish tanker company TORM A/S [NASDAQ:TRMD] (TORM) continues to seek a long-term resolution to its huge debt load, its success will depend on decisions by just five banks, industry news site ShippingWatch reports.

Thirteen banks were involved in the company's initial restructuring plan, which has allowed it to continue to operate, but today the only remaining institutions are Danske Bank, HSH, SEB, HSBC, and DDS / Singapore.

The banks are in negotiations with potential investors, meeting frequently with equity funds and others that may want to acquire the debt and essentially take ownership of the company.

Nordea sold its stake in the company for $166 million earlier this year, after reducing its initial price by about a third.

That development could influence the remaining banks' willingness to sell at a reduced price, particularly as the European Central Bank (ECB) is putting pressure on banks to increase their capital resources.

"For a long time the major accounting firms bought into the German banks' explanations," one source involved with the situation said.

"Now we're looking at a situation where certain banks in large syndicates, as in Torm, for example, have started divesting their lending stakes at around 60-70 cent to the dollar.

"This does not fit with the fact that German banks have till now demanded 90 or 95 cent to the dollar, and the banks' accountants are now questioning this development big-time."

Danske Bank is also reportedly considering divesting its stake in TORM but has found few interested buyers.

TORM reported in May that it lost $222 million before taxes in the first quarter of the year, largely due to an impairment charge.