TORM completes comprehensive restructuring, cuts debt to $561 million

By Caroline Salls

Pittsburgh, July 13 – TORM A/S completed its comprehensive restructuring, recapitalizing its balance sheet by reducing existing debt to $561 million from $1.4 billion through a lender debt writedown to current asset values against the issuance of warrants and a subsequent optional exchange of debt to equity, according to a news release.

As part of the restructuring, OCM Njord Holdings Sarl, a wholly owned subsidiary of entities owned by Oaktree Capital Management, contributed a fleet of 25 on-the-water and six newbuilding product tankers to TORM’s group.

“We have created one of the largest owner-operators of product tankers globally, and we expect TORM to deliver strong, positive financial results already this year after an extended period of financial difficulties,” TORM board chairman Flemming Ipsen said in the release.

Chief executive officer Jacob Meldgaard said in the release, “the restructuring and TORM’s strong operational performance provide a robust platform for the future as we set out for new horizons.”

Following the registration of capital increases with the Danish Business Authority, the registered A share capital of TORM will amount to nominally Kr. 957.54 million.

The company said the new A shares to be issued in connection with the restructuring correspond to 99.2% of TORM’s registered share capital and votes.

The new A shares are expected to be admitted to trading and official listing on Nasdaq Copenhagen by the end of July.

For full-year 2015, TORM said the combined group expects positive EBITDA in the range of $170 million to $210 million and a profit before tax in the range of $100 million to $140 million.

As of the close of business on July 13, the combined group had available liquidity in the form of cash and cash equivalents in excess of $125 million, of which $55 million represents an Oaktree cash injection, and a new undrawn working capital facility of $75 million.

Restructuring terms

The main components of the restructuring will include the following:

• TORM’s lenders will write down more than $500 million of the current debt, which will reduce TORM’s existing debt to an estimated $873 million and give a loan-to-value ratio of 100%.

In consideration for the write-down, the lenders will receive warrants representing 7˝% of the share capital of TORM at completion of the restructuring with a strike price of 110% of the share value of TORM on completion;

• Following the mandatory debt write-down, TORM’s lenders may elect to exchange further debt for new equity. The maximum total debt exchanged through this optional exchange will be 50% of the remaining debt then outstanding.

TORM said lenders are expected to equitize about 35% of the debt remaining after the mandatory write-down. Those lenders not participating in this optional exchange with at least 5% of their debt will receive their portion of reinstated debt equal to 99% of their proportionate vessel value;

• The debt remaining after the optional exchange will be reinstated on the terms agreed to in a new term loan facility, which will benefit from first priority security over the existing TORM vessels and some unencumbered vessels to be contributed by Oaktree. The debt will have a maturity of six years from closing of the restructuring;

• Oaktree will contribute to TORM 25 product tankers, appraised at $501 million as of March 27, and six MR newbuildings with delivery in 2015-2016, appraised at $223 million as of March 27. The average broker values for TORM’s fleet are $821 million as of March 27;

• The company said the Oaktree asset contribution also takes into account $142 million of Oaktree contributed debt as at Feb. 28, benefitting from a mortgage over 13 of the 25 contributed vessels. The debt matures in 2019.

In exchange for this contribution, TORM will issue to Oaktree shares in TORM so that Oaktree holds the same percentage of the outstanding shares of TORM as its contributed net assets comprise the total net asset value of TORM;

• Oaktree will be a majority shareholder in TORM following the completion of the restructuring. The precise shareholdings in TORM will depend on the elections made by the scheme creditors participating in the optional exchange.

Following the restructuring, the current shareholders in TORM will retain less than 1% of the enlarged share capital;

• Some of the company’s existing lenders will provide a $75 million new working capital facility, which will be secured by the same assets as the new term facility but will rank ahead of the new term facility with respect to the proceeds of enforcement of the collateral;

• TORM will adopt new corporate governance provisions to afford appropriate minority shareholder protection. TORM said it will hold an extraordinary general meeting before the completion of the restructuring to seek the necessary shareholder approval for the adoption of the new corporate governance terms and will hold another extraordinary general meeting after completion of the restructuring to elect new members to the board.

The new shares in TORM issued in connection with the restructuring will be listed on Nasdaq OMX Copenhagen; and

• As soon as possible following completion of the restructuring, TORM intends to implement a share consolidation to reduce its total number of issued shares.

TORM is a Copenhagen-based carrier of refined oil products and is involved in the dry bulk market.

© 2015 Prospect News.
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