Torm seeks 'belief' in products market for IPO to fly

Jacob Meldgaard believes the tanker market still requires more positive conditions to support a successful US listing. 

Danish tanker giant Torm is waiting on higher confidence levels in the products tanker market before pushing the button on a long-awaited US initial public offering (IPO).

Torm, in which Oaktree Capital Management is the largest shareholder, has laid the groundwork to add a New York listing to its existing position on the Nasdaq Copenhagen Stock Exchange and had initially sighted last year to assume the dual structure.

Executive director Jacob Meldgaard says the fact that the capital markets are active and open does not make up for the current rate environment.

“You can’t balance it out exactly but the strength in the capital markets is definitely a tick in the box for us,” Meldgaard told TradeWinds this week.

“That would mean we could potentially have an open window for the US listing. However, I don’t see that the current rate environment is constructive enough to make that a successful one.”

Meldgaard says the company is not looking for a specific rate level before launching the IPO.

“What we need to see is more of a belief in the future rather than an absolute level on the freight rates,” he said. “When the steam is on and there is an absolute belief that now we have an uplift in rates, that is the time when you will have the opportunity to have a successful IPO.”

Meldgaard was speaking to TradeWinds after the owner reported a reduced pre-tax profit of $5m for the first quarter, down from $31m at the same stage a year ago following a decline in the products market.

He says the sector’s orderbook has shrunk to a “manageable level” of around 10% of the trading fleet, meaning the supply side of the market is “under control”.

“On the demand side, the world economy is robust but for our sector the current stock levels are elevated," he said. "High inventories need to be driven down so that we can get more stress in the system and a longer-term strong freight rate environment."

In its quarterly report, Torm announced the sale of the 35,800-dwt Torm Trinity and Torm Madison (both built 2000) as part of its fleet-renewal process.

It also entered into a third sale-and-leaseback deal of 2017, this time involving the 46,000-dwt Torm Vita (built 2002).

“We and other companies in the same sector have some confidence in the earning power over the longer run and that is the reason for a sale-and-leaseback structure rather than a straight sale,” Meldgaard said.