BW LPG has begun constructive talks with Aurora LPG's lenders ahead of an expected takeover of the Norwegian VLGC specialist.

Aurora yesterday voiced support for a deal that has been improved twice since it was first launched.

At the same time it said short-term waivers were expected to be secured until the end of the first quarter of 2017, by which time the transaction should be complete. 

Martin Ackermann, chief executive of BW LPG, told TradeWinds: “Given the current market outlook is still quite sombre I’m quite confident our offer remains the most attractive option to Aurora shareholders.

“Shareholders and the market acknowledge we are the best [placed] to solve the solvency situation of the company - which is not just short term liquidity but a more permanent situation.”

Asked about contact and progress with Aurora's banks, Ackermann explained: “We have been in deep conversation with all of their lenders. We are very encouraged with how the discussions are going.”

He notes that conservative BW LPG is established as a preferred borrower with shipping banks at a time when the global shipfinance scene is “binary”.

“Either you have financing or you don’t,” he said when asked about global ship finance conditions. 

Acceptable third quarter

Ackermann was speaking to TradeWinds the day after BW LPG reported a third-quarter loss of $60.4m. The numbers included a $50.3m impairment on vessel values and a further $10.6m on Aurora shares.

On an operating level the figures were better than expected. Core operating profit of $33m was ahead of the $29m consensus, according to Clarksons Platou Securities.

Ackermann says the underlying results are acceptable given the current market situation.

Erik Nikolai Stavseth of Arctic Securities notes BW LPG’s offer is 275% below a takeover bid from Avance Gas that was rejected.

“From the perspective of BW LPG we see the takeover of Aurora LPG as a well-timed transaction which adds capacity at rock-bottom prices,” he said.

Happier New Year

Earlier this week analysts at DNB Markets argued that with propane price differentials expected to normalise, VLGC rates should rise despite declining fleet utilisation in 2017.

“Although high fleet utilisation remains a necessity condition for ‘super profit’ in shipping, we do not believe it relates deterministic to rates; despite lower fleet utilisation we expect rates to increase in 2017,” wrote Nicolay Dyvik, Petter Haugen  and Jorgen Lian.