Eitzen group cancels newbuildings

(Apr 9 2009)

Both Eitzen Chemical and Camillo Eitzen (CECO) have cancelled newbuilding orders in a bid to reschedule debt.

Eitzen Chemical said that by cancelling orders for five 12,000 dwt stainless steel chemical tankers, the company would reduce its remaining newbuilding programme by $175 mill. At the same time, the company said that it had started discussions with its lenders to restructure part of its debt.

As a result of the cancellation, Eitzen Chemical will compensate the yard – Sasaki Kinoe - by releasing the deposit of $7.5 mill and said it will pay a further cancellation fee of $7.5 mill by 30th November this year, on condition that the company can provide satisfactory security to the yard for the cancellation fee.

By taking this action, Eitzen Chemical said that it will record a loss of about $10 mill.
The company also said that the delivery of the ’Sichem Osprey’, a 25,000 dwt, coated IMO II type, at Dae Sun on 7th April, concluded its South Korean newbuilding programme.
Both Eitzen concerns said that they had initiated discussions with their lenders to amend the debt repayment schedule and to adjust the covenant structure, to better fit today's market environment.

Eitzen Chemical ceo Terje Askvig explained: "We expect continued challenging market conditions following the financial crisis. It is therefore important for us to improve the cash flow situation by reducing the capital expenditure programme and seek to agree with our lenders reductions in principal repayments. With this restructuring plan in place, we will be better positioned to meet the challenging market conditions that lie ahead."

As for CECO, it had also reached an agreement with the same Japanese yard to cancel six 2,500 cu m gas carrier newbuildings, against a final and total settlement of $2.5 mill.
By cancelling the newbuildings, the company said that it would save $105 mill on its existing newbuilding commitments, which would be reduced to zero.

Source: Tanker Operator