Dubai chemical carrier owner Gulf Navigation is considering the issuance of mandatory convertible bonds (MCBs) as it continues to pay down its debts and seeks to resolve covenant breaches with lenders.
The Dubai Financial Market (DFM)-listed company announced a first half profit of AED14.36m ($3.9m) on Tuesday but remains in breach of a number of covenants agreements, meaning the loans to be repaid on demand.
Gulf Navigation Holding’s net liabilities, as of 30 June 2016, stood at AED587.9m ($160m) while its accumulated losses were AED227.9m. The company has brought down its net liabilities from AED707m at the end of June 2015.
Auditor Ernst & Young (EY) said Gulf Navigation’s ability to continue as a going concern was reliant on continued availability of external debt financing and/or the ability to raise additional equity as well as reverse or mitigate adverse legal awards.
Negotiations with lenders are on-going while Gulf Navigation’s shareholders agreed on 18 January to the possible issuance of MCBs, the terms of which Gulf Navigation’s board of directors are still considering “along with other options”.
“The discussions with lenders and other creditors are in progress and the group believes that a mutually acceptable agreement will be reached with all parties,” said EY.
“The Directors, after reviewing the Group’s improving profitability, cash flow forecasts, and strategic plans for a period of not less than 12 months [from the signing of the H1 accounts], and after reviewing the status of the Group’s legal defence, and plans for negotiating a settlement in respect of the adverse awards, have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future.”
Gulf Navigation underwent financial restructuring in early 2014 and sold off its two VLCCs, which were under arrest by creditors at the time.
For 2016 half year revenue rose by 6% to AED74.4m, up from AED70.1m for the corresponding period in 2015.
Gulf Navigation has restructured its organisational makeup as part of on-going efforts to turn the business around with Omar Abu Omar taking up the position of president – maritime and operations. He replaces ceo, Captain Parag Jain, who “ceased work with the company as of July 25”.
The company operates a fleet of eight chemical tankers and four crew boats. It is primarily engaged in the transportation of commodities but its subsidiaries are also involved in chartering vessels, shipping services, clearing and forwarding services and container and packaging services.
Gulf Navigation’s shares closed at $1.04 on the DFM yesterday.
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