Bulk Invest May Go Bankrupt "Within Weeks"
Bulk Invest (formerly Western Bulk) has announced that it faces a lawsuit from creditors seeking reversal of the recent sale of its subsidiary Western Bulk Chartering to Bulk Invest's majority shareholder, Kistefos AS – and that it may have only weeks to negotiate its continued survival.
Bulk Invest faced mounting liquidity problems early this year and entered into an “accelerated process” with Kistefos for the sale of of its chartering unit in order to raise capital. To meet regulatory requirements, the sale had to be approved by shareholders at a general meeting, held February 25, and a majority voted in favor.
However, the firm said that “the Company [Bulk Invest] immediately prior to the general meeting had received an application for arrest in the shares of Western Bulk Chartering AS and a motion for injunction with a request for return of the shares.”
Bulk Invest has not specified the names of the creditors involved in the suit, and it will contest the suit. The firm “believes that the alleged claims are completely unfounded.”
Media reports suggest that six Japanese shipowners (with $170 million in charter contracts with Bulk Invest) have asked for an injunction to halt the sale, which they described as “an illegal payment of dividend,” alleging that Kistefos paid too little for Western Bulk Chartering. The shipowners reportedly see a bankruptcy proceeding as an acceptable outcome.
Even if it should win the suit and keep the capital raised from the sale, Bulk Invest faces trouble. In its Q4 2015 results released Monday, the firm says that it is locked into long-term chartering-in contracts – at charter rates well above what it can get by hiring the ships out at present spot prices.
The firm says that its future is “highly dependent” on negotiating rate reductions for its chartered-in fleet and discussions with its creditors. If “no solution is achieved, [Bulk Invest] will most likely not be able to continue its business” - and the timeline may be short. A new arrangement is needed “within a few weeks,” the firm said.
The firm raised $16 million in cash from the recent sale, but it is spending about $4 to $5 million per month on overhead, even though it has “implemented an almost full stop in payments, including charter hire for the chartered-in vessel.”
A dissolution of the company at current market values for its assets would most likely leave creditors with a loss, the firm says – especially given the bankruptcy liabilities in its charter-in contracts, which it estimates in the range of $250 million.