The asset divestment initiative is being driven by a number of the 14 banks behind Torm’s debt restructuring facility, and is conditional to their future co-operation.
At least one of the three principal bank consortia want Torm to generate income by divesting five ships immediately. This facet of the restructuring deal has the potential to force significant capacity cuts on Torm, and has potential serious implications for personnel employed by the company.
Under that agreed restructuring deal, Torm’s existing €1.38 billion (US$1.8bn) in bank debt has been extended to 2016, while repayments have been deferred completely until September 2014.
Additionally, Torm’s management has until 1 January 2013 to commence a sale process for ships to be sold and initiate a plan to cover repayment of the debt mortgaged on the ships by the same date.
A broker assessment of Torm’s existing fleet conducted in June, and which excluded leased vessels, estimated the market value of all ships at around €1 billion.
Torm CEO Jacob Meldgaard said: “It has taken quite some time to reach this point, and it has been painful for the company.
“The result means we continue to run our own operations. We got the best possible deal for the company.”
The restructuring deal allows Torm’s shareholders to maintain a 10% equity holding. Moreover, the company will be provided with a €77 million new working capital facility until September 2014.
Interest on the existing debt will only be paid if Torm has sufficient liquidity. This applies until 30 June 2014, with an option to extend this until 30 September.
Torm is projecting a pre-tax operating loss of €270-€293 million for its current financial year.