GOGL Refinances USD 284 Mn Loan, Delays Scrubber Installations amid Coronavirus

BulkerIllustration. Image Courtesy: Pixabay under CC0 Creative Commons license

Dry bulk shipping company Golden Ocean Group Limited (GOGL) completed the refinancing of its USD 284 million loan facility that was scheduled to mature in December 2019 and financed 15 vessels.

The balloon payment was financed with a new USD 155.3 million term loan facility with six unnamed shipping banks. The loan has a tenor of five years and a 20-year age-adjusted repayment profile, the bulker owner and operator said.

In the fourth quarter of 2019, the company agreed to amend seven of eight charters with Bermuda-based shipowner Ship Finance International (SFL) whereby SFL will partly fund the installation of scrubbers on seven Capesize vessels.

In January 2020, GOGL received USD 17.5 million from SFL in connection with the charter amendments, which will be repaid through increased charter rates from January 1, 2020 to June 30, 2025.

Following the amendments, Golden Ocean recorded an increase in right of use assets of USD 193.7 million and USD 166.9 million in lease obligations related to its finance leases.

So far, GOGL has completed 14 of 23 planned scrubber installations on certain of its Capesize vessels. The company said that the completion dates for some of the remaining installations have been extended due to the impact of the coronavirus in China.

“It is too early to forecast the potential impact of the coronavirus beyond the short-term and information being released from China does not provide a complete view of its current impact. However, it is unlikely that normal business operations will quickly resume. As a result, commodity-related supply chains may become disrupted, with some taking longer than others to return to normal,” GOGL said.

“Should market weakness persist for a prolonged period of time, the likelihood of vessel scrapping will gradually increase. Indeed, in January 2020 five Capesize vessels have been demolished, the highest figure since April 2019. This represents the market’s organic way of rebalancing capacity.”

In the Capesize vessel class, there are 74 vessels that will be over 20 years of age by the end of 2020, representing 16.5 million dwt, or 4.7% of the total Capesize fleet, and 230 Capesize vessels, or 44.3 million dwt, that will be 15 years of age or above.

“Despite emergence of exogenous events like the tragedy that occurred at Vale’s iron ore operations in Brazil in 2019 and the spread of the new coronavirus at the start of 2020, we are confident of the medium to longer term development of dry bulk transportation demand,” GOGL said.

The dry bulk shipping company reported a net income of USD 41 million in the fourth quarter of 2019, compared with net income of USD 36.7 million a year earlier.

Operating revenues amounted to USD 244.7 million in Q4 2019, an increase of USD 25.4 million from USD 219.3 million in the third quarter of 2019.

The increase in operating revenues was primarily driven by higher average freight rates on vessels that were chartered in short-term for trading in the spot market.

For the full year, net income stood at USD 37.2 million, compared with net income of USD 84.5 million for the full year 2018.

“Golden Ocean’s solid performance continued in the fourth quarter despite a weakening rate environment. While the Company’s earnings potential has been demonstrated over the course of last year, the market is currently presenting a challenging scenario that will impact our results in the near term. As the current market dynamic continues to unfold, our focus remains on maintaining efficient operations and a strong balance sheet and liquidity position,” Ola Lorentzon, Chairman of the Board of Golden Ocean and interim Chief Executive Officer, commented.

GOGL has a fleet consists of 79 vessels, with an aggregate capacity of approximately 10.9 million dwt.

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