Western Bulk asks for noteholder approval to issue $15 million stock

By Susanna Moon

Chicago, Dec. 1 – Western Bulk Chartering AS is asking for approval to issue stock under its NOK 300 million of floating-rate senior bonds issue 2013/2017.

Western Bulk’s board of directors has proposed issuing about $15 million of stock “in order to strengthen the company's working capital,” with guarantees from its two largest shareholders, Kistefos AS and Ojada AS, for $13.8 million and $1.2 million, respectively, according to a company announcement.

The company has scheduled a bondholders meeting for Dec. 15 in Oslo.

The issue has gained acceptance from a majority of the bondholders ahead of the meeting, the company said.

Specifically, the company is asking for holder consents to amend the note terms as follows:

• To change the interim reporting to semiannually from quarterly;

• To extend the waiver period for the $15 million minimum book equity by one year through Dec. 31, 2017;

• To introduce the ability to sell issuer’s bonds; and

• To add a clause that allows the issue of $15 million of stock by March 31, 2017.

“Although the market has strengthened recently and a number of mitigating initiatives are contributing positively to the group’s results, there is still a need to further strengthen the company’s balance sheet and cash position,” according to a separate notice by Nordic Trustee ASA.

As announced June 27, Kistefos Equity Operations AS secured the needed majority approval to transfer its NOK 300 million of floating-rate senior bonds to operating subsidiary Western Bulk Chartering AS.

By obtaining the consents, the company met the condition for closing its NOK 167 million private placement in Western Bulk.

Kistefos sought holder consent to amend the notes and grant the transfer of the bonds originally issued by Western Bulk ASA in order to facilitate the sale of stock.

Western Bulk Chartering was planning the $15 million to $20 million equity issue because of its worsening financial position, caused by a challenging market with historically low dry bulk charter rates.

Some creditors had objected to the sale of Western Bulk Chartering to Kistefos, and there was a risk that the bankruptcy estate or creditors could take legal action to challenge the sale, which could make investors reluctant to invest new equity in Kistefos.

The company’s solution was to offer the investors an investment in Western Bulk Chartering directly rather than in Kistefos. Because Kistefos’ ownership in Western Bulk Chartering will be diluted by the equity transaction, Kistefos proposed replacing itself as borrower with Western Bulk Chartering.

In addition to transferring the bonds to Western Bulk Chartering, Kistefos sought to increase the carve-out for its credit facility to $20 million from $8 million and for permitted security to $20 million from $10 million in order to increase its credit facility to fund working capital fluctuations.

The transfer of the bonds was conditioned on the company raising at least $15 million in the proposed equity issue.

Kistefos assumed Western Bulk’s obligations under the bond issue earlier this year when it purchased Western Bulk Chartering AS from Western Bulk, which later changed its name to Bulk Invest ASA.

As previously reported, the bondholders approved the transfer of the bonds to Kistefos from Western Bulk in February. They also approved amendments that extended the maturity date by two years to April 2019, reduced the coupon margin to 325 basis points from 675 bps and amended and removed some covenants.

Western Bulk is a global operator of dry bulk vessels based in Oslo.

Kistefos Equity Operations is indirectly wholly owned by Kistefos AS, which is an Oslo-based investment company with a portfolio in financial services, telecom, shipping, offshore and other industries.

© 2015 Prospect News.
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