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Eitzen Chemical – a light at the end of the tunnel?
(Nov  6  2009)

Eitzen Chemical claimed that it was now at the concluding phase of its financial restructuring.

For 3Q09, the company reported EBITDA of $11.6 mill, which included gains of $4.4 mill for the 3rd quarter of 2009, compared to $16.5 mill in the previous quarter.

TCE rates for the company's fleet below 30,000 dwt were down by 11%, compared to the previous quarter, while rates for the vessels above 30,000 dwt decreased by 31%, compared to 2Q09. On average, earnings for the entire fleet were down 15% versus the previous quarter.

Low activity in the clean petroleum market and a 26% increase in bunker costs from the previous quarter were the main factors behind the reduction in TC revenues, Eitzen Chemical said.

The company also said that it expected the market to continue its weak pattern in the short term.

However, leading indicators now point towards a sharp recovery in industrial production and consequently increased demand for chemical tanker transport. Furthermore, the fleet growth should moderate significantly going forward.

Hence, it is expected that the chemical tanker market should gradually become more stabilised next year and eventually reach a balance in the years thereafter.

In October 2009, the Company announced agreements with its banks and bondholders as part of the ongoing financial restructuring. Eitzen Chemical has requested further adjustments to its bank loan agreements as part of the process to raise new equity.

Terje Askvig, Eitzen Chemical CEO, said: "Eitzen Chemical is now at the concluding phase of its financial restructuring, following the agreement with the bank syndicates and bondholders in October. The intended equity issue of minimum $100 mill announced today (5th November) is a condition in the agreement with the lenders and an integral part of the financial plan.

“To further facilitate the equity issue, we have asked the bank syndicates to amend the agreement we have reached. We believe the robust financial platform following the restructuring, coupled with the company's modern fleet and strong market position will be a solid basis for creating shareholder value and safeguarding our various stakeholders going forward," he concluded.

As for the private placement, Eitzen Chemical has retained ABG Sundal Collier Norge and Carnegie to advise on and effect a contemplated private placement of new shares with gross proceeds in the amount of minimum $100 mill and maximum $130 mill aimed at large existing shareholders of the company.

The book-building period started on 5th November. The timing for the closing of the books will be at the sole discretion of Eitzen Chemical in consultation with the joint lead managers.

Camillo Eitzen (CECO), the main shareholder of Eitzen Chemical, will put up $50 milln. CECO owns 51.80% of the shares of the company prior to the private placement. In addition, there is a significant amount of pre-commitments from international and domestic investors.

Eitzen Chemical has called an extraordinary general meeting (EGM) for 26th November 2009 to approve the company’s planned equity issue.

The company said that it intended to draw up to $10 mill under a loan agreement with CECO to secure short term liquidity until the equity issue is completed. The loan is to be repaid by proceeds from the equity issue following completion of the private placement.

Eitzen Chemical said that BLT’s indicative offer for CECO announced on 5th October was received positively. An integral part of the process was that BLT would inject new cash into CECO, which would secure the company’s participation in the planned equity issue in Eitzen Chemical.

To secure the timely completion of the equity issue and also in view of CECO's confirmed independent participation of BLT’s offer, Eitzen Chemical’s board has now decided to execute the equity issue.

This is not conditional on whether BLT ultimately launches and/or completes an offer for CECO, the board said.

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