Nordic Shipholding A/S - Interim report Q1 2012

5/31/2012 2:56 AM EST

Nordic Shipholding A/S
Quarterly report

Nordic Shipholding A/S - Interim report Q1 2012

Summary

The comparison figures for first quarter 2011 are stated in parenthesis.

On 30 April 2012 Nordic Shipholding sold its Chemical vessels and the entire
organization. If nothing else is mentioned, the discussions of financial data
relates to the continuing business. Following the sale Nordic Shipholding’s
activities consist of six product tankers. 

In the first quarter of 2012, the Time Charter Equivalent (TCE) revenue for
continuing operations increased by USD 1.7 million to USD 7.3 million. Even
though there was an increase in TCE revenue in the first quarter of 2012 the
low freight rates, which have dominated the Company’s respective markets the
previous years, remained at unsatisfactory low levels. Due to continued focus
on costs,EBITDA for continuing operations was USD 3.4 million in Q1 2012, up
from USD 2.6 million in Q1 2011. 

Year to date, the cash flow for continuing operations was USD 1.0 million
primarily deriving from operating activities. The comparable figure for Q1 2011
was USD 1.6 million. 

For 2012 Nordic Shipholding maintains the expectations for continuing
operations of TCE revenues in the region of USD 23 – 27 million, with an EBITDA
of USD 7 - 10 million. The result before tax including discontinued operation
is expected to be a loss of USD 11 to 15 million before any write-downs on
vessels, goodwill or other assets and before an estimated book loss from the
sale of the chemical tanker activities of USD 3-5 million. 

As mentioned in the annual report for 2011, the Company has been striving to
obtain a long-term solution to the financial challenges deriving from operating
in depressed markets for a prolonged period of time. An important step in that
effort was taken on 27 March 2012 when Nordic Tankers and Triton reached a
conditional agreement on the divestment of Nordic Tankers’ chemical tanker
operations for a price of USD 30 million subject to approval by the Annual
General Meeting on 20 April 2012. 

The Annual General Meeting on 20 April 2012 approved the divestment
unanimously, hence the work related to the completion of the divestment could
continue and was successfully finalized when the deal was completed on 30 April
2012. The divestiture of the chemical tanker activities comprises a sale of all
nine owned chemical tanker vessels, the six in-chartered chemical vessels, all
contracts of affreightment and the entire organization of Nordic Tankers. 

The divestment price of USD 30 million was split into two:

  1. USD 10 million was applied to reduce the bank debt in the six product
     tankers remaining in Nordic Shipholding, and
  2. USD 20 million was lent to the company acquiring the nine owned chemical
     tanker vessels. The loan is also called a vendor note and is subordinated
     to the bank debt in the nine vessels and is repayable in 2017 or
     potentially later. The vendor note will accumulate rolled-up interest of
     7.5% annually. Certain clauses in the vendor note related to situations
     where additional equity injections in the buying company will be needed in
     the future may lead to the value of the vendor note being materially
     diluted, however, no such situation is currently expected. Nordic
     Shipholding has entered into an agreement with Clipper which gives Nordic
     Shipholding an option to assign the vendor note to Clipper during 2012,
     against termination of two loans towards Clipper (related to payment for
     the organization acquired in 2010 and a loan received during 2011). The
     debt to Clipper is about USD 15 million. Nordic Shipholding can only assign
     the vendor note to Clipper if Nordea and Danmarks Skibskredit approve the
     assignment.

This quarterly report covers the period 1 January to 31 March 2012, and
consists of figures related to both the chemical segment (discontinued
operations) and product segment (continued operations). From 1 May 2012 and
going forward the figures will only relate to the remaining product tanker
activities as described above. 

The divestment has given the company more time to achieve a permanent solution
to its financial challenges. The progress for establishing a long term funding
is proceeding according to plan. However, if new equity is not injected and the
moratorium granted is not extended beyond 31 March 2013 or the market does not
improve significantly, the Company may be unable to honor its commitments
towards its banks, which consequently may result in loss of shareholders’
equity. 

For the full interim report Q1 2012, please see attached.