Tankship Owner, Gulf Navigation Group, in Dire Straits
The Dubai-based shipping company Gulf Navigation has posted a loss of Dh614.3-million in Q3 2013 attributable to a Dh292.8m impairment of goodwill and a write-off of Dh308.6m of the value it expected to receive for the sale of its two very large crude carriers (VLCCs). Doubts about the company’s survival prospects increase and on this question the company states as follows:
The Group's condensed consolidated interim fmancial infonnation has been prepared on a 'going concem' basis, however, given the conditions and events described below there exists a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concem.
The Group incurred a loss of AED 644,033 thousand during the nine month period ended 30 September 2013 and, as of that date; the Group had accumulated losses of AED 1,121,705 thousand which represents more than one half of the Group's share capital.
In accordance with the UAB Federal Law No 8. of 1984, there is a requirement to convene an extraordinary general meeting ("EGM") of the shareholders and obtain a resolution from the shareholders to enable the Group to continue as a going concem. Therefore, the Directors have resolved to convene an EGM in December 2013 to put forward a resolution that the Group shall not be dissolved and continue its operations in the nonnal course of business.
The ability of the Group to continue as a going concem is reliant upon obtaining the approval of the shareholders in the EGM and continued availability of extemal debt financing and additional equity. At 30 September 2013, the Group was in breach of the tenns ofthe loan agreements with its lenders.
Further during the period, the Group was unable to make payment of a loan instalment of USD 938 thousand (AED 3,433 thousand) which was due in July 2013 (Note 8). These breaches gave the lenders the right to call an event of default and by further notice, declare that all the loans are payable on demand. Accordingly, the Group's bank borrowings are classified as current liabilities at 30 September 2013.
These events have resulted in the Group having a net current liability position at 30 September 2013 of AED 542,794 thousand.
On 13 September 2013 and 4 October 2013, two of the Group's vessels, Gulf Sheba and GulfEyadah, were arrested at the instructions of the lenders at the Port of Rotterdam and at the Port of Bahamas respectively. Notwithstanding such arrest, management is continuing its discussions with its lenders to proceed for a consensual sale of both vessels and restructure the payment of the shortfall of loans relating to these vessels.
If the Group is not able to agree the required restructuring of the remaining loan related to the vessels and in the absence of other financing altematives, the Group would be dependent on market based asset values to repay its borrowings. As a result, there exists a material uncertainty which may cast significant doubt on the ability of the Group to continue as a going concem such that the Group may be unable to realise its assets and discharge its liabilities in the nonnal course of business. Accordingly, assets may be realised at significantly less than book value and additional liabilities may arise.