Double breach

Camillo Eitzen admitted to a double breach of loan covenants Thursday as it released a fourth quarter profit warning.

Shipowner, Axel Eitzen.

Falling gasship values led unit Eitzen Gas to break the terms of a loan while sluggish earnings from the sector and unrealised losses on dry-cargo futures will result in lower than forecast three month profit, the shipowner says.

Oslo-listed Eitzen said: "As a result of weaker market value of vessels, we have impairment tested the book value of the gas fleet, which has resulted in the need for a write down of $40.9m. The lower market values have also resulted in breach of two of six covenants for the Eitzen Gas loan.

“The minimum value covenant was restored after the ordinary installment 6 January, while the minimum adjusted capital ratio related to Camillo Eitzen remains in breach.

“CECO has initiated a dialogue with the banks with the purpose to obtain a waiver for a period. As a result of the breach of covenant the entire outstanding $158m gas facility will be posted as short term debt until a waiver is obtained.”

Looking ahead to its fourth quarter results, to be released on 27 February, Eitzen says earnings from its gasship unit will be a fifth lower than in the previous quarter. Provisions following the decline of the dry-cargo market and potential but unrealised losses on future contracts will result in a loss for Eitzen Bulk.

It said: “The gas market was affected by reduced volumes under our contracts of affreightment (COA's), lower freight rates in the spot market, increase in waiting days. This has resulted in earnings reduction of about 20% compared to Q3 and EBITDA of approximately $4.2m from the gas segment.

“The bulk market has been affected by continued turbulences, resulting in postponement of cargoes under COA's for Eitzen Bulk. As a result Eitzen Bulk will take about $14m in provision during the quarter, whereof the majority is related to postponement of cargoes.

“EBITDA for the fourth quarter will be approximately $-5.9m. Eitzen Bulk has, however, not suffered any material loss from settlement of its Freight Forward Contracts (FFA's).”

Shares in Eitzen were unchanged at NOK 13.50 ($1.92) this morning, valuing the shipowner at NOK 543.6m.

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