Nordea Bank slams Primorsk Chapter 11

Lead bank on $530m loan facility says tanker owner’s restructuring plan is ‘unrealistic’.

Lawyers for Nordea Bank came out swinging Wednesday in the New York bankruptcy of Russia’s Primorsk International Shipping.

The White & Case legal team for Stockholm-headquartered bank, which is the lead bank on a $530m secured loan facility, allege that the Primorsk Shipping Corp (Prisco) affiliate appears to have violated the loan by diverting charter revenue and locking its ships into long-term charters.

And they alleged that a restructuring plan that would hand ownership of the company to bondholders and shareholders is based on “unrealistically rosy predictions” while the current equity cushion is already “razor thin”.

Too much risk

The White & Case lawyers allege that the plan is seeking to force Nordea, the senior lender with $262m in remaining debt secured by the tankers, to bear all the risk while shareholders and bondholders alone enjoy the upside.

“Invariably, absent agreement with their secured creditors these cases fail, and the vessels are liquidated or handed back to secured creditors, but only after substantial cost, expense, and value destruction,” the lawyers wrote. “All parties presumably hope to prevent such a result here.”

15 Primorsk Shipping Corp (Prisco) chief executive Alexander Kirilichev

Alexander Kirilichev-backed Primorsk filed for bankruptcy Sunday listing $80.9m in bonds in addition to the Nordea-led debt. It estimated its tanker fleet to be worth nearly $292m on a charter-free basis. A lawyer for Primorsk could not be immediately reached for comment on Nordea’s claims.

In today’s filing, Nordea also complained that Primorsk failed to disclose that the bank agreed in July to a six-month forbearance of the debt backed by the company’s nine ships.

And while Primorsk pursued a fleet sale that fell through at year end, it failed to pursue individual tanker sales as promised, the bank’s lawyers wrote to US Bankruptcy Judge Martin Glenn.

The lawyers say that Nordea shares Primorsk’s goal of keeping its ships trading uninterrupted but complained that the bankruptcy filing was made without any prior notice.

And while the White & Case attorneys say a short-term agreement has been reached with Primorsk to allow the shipowner to use its cash, but there are “a number of problems” still remaining in the case.

Primorsk wants to operate

Holly Etlin, Primorsk’s chief restructuring officer at AlixPartners, said in court papers that the company believes reorganisation rather than vessel sales is the best way to maximise the value to creditors in the current strong market.

But she said Nordea continued to insist on vessel sales.

“As a result, Primorsk, after careful consideration of all alternatives, determined that the filing of the Chapter 11 cases was in the best interests of the company and all of its stakeholders,” she wrote earlier this week.


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Primorsk International heads into Chapter 11

Tanker owner has sought court protection in New York as part of restructuring.

19 Jan 2016