Reuters: Hot Stocks: UPDATE 1-Tanker firm Frontline says may struggle to pay debts

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UPDATE 1-Tanker firm Frontline says may struggle to pay debts Aug 28th 2013, 07:26 Wed Aug 28, 2013 3:26am EDT * Q2 operating loss $100 mln vs $19 mln loss forecast * Takes big impairment charge * May have trouble repaying debt due in 2015 (Adds detail, background) OSLO, Aug 28 (Reuters) - Frontline, once the world's largest oil tanker firm, suffered a big second-quarter loss and said it may struggle to repay its debts if the shipping industry does not pick up soon and it is unable to raise equity or sell assets. The Norwegian firm, part of tycoon John Fredriksen's business empire, said on Wednesday its charter rates were well below break even in a "massively oversupplied" tanker market and that it would take some time for balance to be restored. "If the tanker market does not recover in the short term and no additional equity can be raised or assets sold, there is a risk that Frontline will have insufficient cash to satisfy liquidity requirements and to repay the existing $225 million convertible bond loan at maturity in April 2015," it said. In the second quarter, the firm suffered an operating loss of $100 million, underperforming expectations for a $19 million loss, as it took an unexpected $81 million impairment charge. Excluding that charge, the company expects its third-quarter operating loss to be broadly in line with the second quarter and its cash position to decrease. "The board is actively monitoring the situation and looking for opportunities to restructure the balance sheet and improve the company's financial position," it said. At 0715 GMT, Frontline shares were down 3.5 percent at 16.7 Norwegian crowns. Fredriksen restructured Frontline at the start of 2012, removing much of its debt and newbuild contracts into a new entity, hoping that an eventual market recovery would restore the firm's fortunes. But the market turnaround has taken longer than expected and in the second quarter, Frontline's hallmark very large crude carriers, or VLCCs, earned an average daily time charter rate of $14,100, well below the $25,000 break even level. The industry is suffering after shipping firms binged on orders before the global financial crisis, with the new vessels now hitting the water at a time of subdued demand. (Reporting by Balazs Koranyi; Editing by Mark Potter) Link this Share this Digg this Email Reprints

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