“We’ll support them through the downturn,” Harald Serck- Hanssen, DNB’s Oslo-based head of global shipping, offshore and logistics, said by phone today. “We’re sure they’ll be one of the winners in the consolidation process that will come as a result of this downturn.”
He spoke a day after Frontline said it will seek talks with creditors and may run out of cash next year. The shares plunged 44 percent, the most since at least 1998, in Oslo trading. Returns are only covering operating costs and ship prices have slid as much as 50 percent, said Frontline, the world’s biggest operator of supertankers.
Serck-Hanssen declined to say how much DNB has lent to Hamilton, Bermuda-based Frontline. The company has $1 billion of bonds and public loans maturing in the next decade, data compiled by Bloomberg show. That includes $363 million of outstanding loans due to mature in 2017 organized by DNB and Nordea Bank Norge ASA.
Nordea Bank Norge said yesterday it has “trust and confidence” in Frontline’s main shareholder, a company indirectly controlled by the tanker operator’s chairman, Norway- born billionaire John Fredriksen. Hemen Holding Ltd. owns a 34 percent stake, according to the company’s last annual report.
Frontline operates a fleet of 67 vessels with a further seven ordered, according to its website. The company, like many competitors, was experiencing the effect on the market of a glut of vessels, said Hans Christian Kjelsrud, Nordea’s head of shipping.
“A successful restructuring of the company will require contributions from all of the company’s stakeholders; owners, lessors, bond holders and banks,” Kjelsrud said by e-mail yesterday.
DNB is seeking a “balanced solution” in any Frontline reorganization including contributions from banks as well as the tanker company’s owners, according to Serck-Hanssen. Lenders typically will offer “some kind of amortization relief” in exchange for an additional cash injection from a company owner, he said.
“As long as you have an owner willing to support and you finance reasonably modern ships, that’s not too problematic,” the DNB manager said. Owners of crude tankers comprise some 10 percent of the bank’s $35 billion of shipping and offshore loans, he said.
Frontline has earned $3.5 billion since 2004, according to Serck-Hanssen. This year’s net loss comes to $185.9 million so far including yesterday’s third-quarter figures, data compiled by Bloomberg shows.
“We’ve had the longest period of sustained upturn in the history of the tanker markets until 2008,” Serck-Hanssen said. The market has worsened for two years, Frontline said yesterday.
General Maritime Corp., the second-largest U.S. owner of oil tankers, filed for bankruptcy on Nov. 17 after falling oil demand and a vessel surplus led to two years of losses.