Posted on December 6, 2022
Financially troubled product tanker operator Concordia Maritime reports that it is continuing with the review of its remaining vessels looking at opportunities to realize the value of its assets based on the strong market. The fleet review is proceeding as the company delivered the first of three additional vessels to its new owners.
“In 2022, we’ll have sold and delivered seven vessels in total,” said Erik Lewenhaupt, CEO of Concordia Maritime. “The first ones were sold to avoid docking costs and to strengthen the company’s financial position, the subsequent ones primarily in order to take advantage of the strong market for ships.”
According to the company, since the beginning of the year, the asset values of the ships have risen, in some cases by over 50 percent. For older ships, the increase has been even bigger in percentage terms. They also reported that the market for the transport of refined products, vegetable oils, and light chemicals has had a strong development since March this year. Both freight rates and vessel asset values have risen.
The strength of the market and the steps to reduce costs helped Concordia to post a pre-tax profit of more than $3 million in the third quarter and $17 million for the year to date versus significant losses in 2021. The company had incurred more than a billion dollars in operating losses over the past five years.
In July 2021, Concordia announced it had reached terms with its banks as well as with its parent company Stena on revised terms for its $114 million in outstanding bank debt. They reported that the company was running out of liquidity and warned it was in danger of violating covenants in its loan agreements.
Concordia reported in September 2022 that it had sold three additional vessels, the Stena Primorsk, Stena Performance, and Stena Provence. The first of the vessels, the product tanker Stena Primorsk was delivered to its new owner on November 30 in Montevideo, Uruguay. The other two recently sold vessels are expected to be delivered at the end of 2022 and the beginning of 2023.
In accordance with the existing bank agreement, the surplus from the sale of Stena Primorsk was used for accelerated amortization of loans. In total, after deducting costs related to the sale, approximately $19 million was used for accelerated repayment of loans. After the sales of the other two product tankers have been completed, the total interest-bearing liabilities are expected to be reduced by a further approximately $36 million.
“Our fleet has long-term contracts, which were signed under different market conditions, provide a stable return – but with a limited yield in current market conditions. We have therefore capitalized on the high asset values and are keeping an open mind about the opportunities for our remaining tonnage. We may sell one or more ships, if we identify attractive opportunities. Timing is important in our industry in terms of both purchases and sales – so it’s all about being able to respond to fluctuations in the market. Work is proceeding in parallel to further develop the company,” says Erik Lewenhaupt.
Reporting the company’s nine-month results in November, they called Concordia Maritime “a company in transition.” They said the company while having slimmed down significantly is now financially stronger and would continue to evaluate its next steps.