Euronav bonds are now worth betting on, according to a Norwegian high-yield fund.
Sissener Corporate Bond Fund bought bonds issued by the Belgian company in December and January.
Euronav bonds constitute 3.5% of the fund, according to its latest monthly report.
Euronav and the controlling Saverys family have met some investor scepticism over the reshaping of the company following the closure of an 18-month takeover battle with John Fredriksen and Frontline.
Fredriksen walked away with 24 of Euronav’s modern VLCCs in exchange for his equity. At the same time, Euronav has completed a takeover of clean shipping operation CMB.Tech, which was previously owned by the Saverys family privately.
The bonds were bought at an average price of 96.25, providing an effective yield of about 8% until maturity in September 2026, with potential for a yield of 9.5% in the event of early redemption in September 2025.
“In our view, the risk is limited during this period,” Oslo-based Sissener said.
Euronav used to be one of the fund’s largest positions, but it has not held a significant position since September 2021.
Now, after last year’s deal with Frontline and the merger with CMB.Tech, the fund has decided to invest in the Euronav again.
“The aggressive newbuild programme is fully financed with cash reserves and bank facilities, and most newbuilds have solid contract coverage with reliable counterparts,” Sissener said.
“In the dry bulk segment, they expect to secure several ships on long contracts before delivery.”
Sissener’s biggest investment is Bluewater Holding. The fund also owns bonds from Shelf Drilling and Tidewater.
The company said it chose not to be active in the primary market in January as deals did not meet its price expectations, for example Danish shipowner Torm’s $200m unsecured bond.
“It seems like the bond market is getting carried away with the current situation and is partly ignoring the fact that the product tanker market is cyclical, and that the outlook could change significantly during the bond's lifetime,” the fund said.
“Overall, we believe that a five-year unsecured bond for a company operating in the spot market for product tankers should offer significantly better rewards.
“While we see potential in the underlying current market imbalance, we don’t find the visibility sufficient to justify five years of risk at a credit spread of 400 basis points.”
Sissener started in March 2019. The fund, which has about 5% of the capital invested in shipping, returned 10.3% in 2023.
It is managed by a team of six led by Philippe Sissener. The return in January was 1.2%.
“With a portfolio yield of 7.6%, we are optimistic that the strong start to the year will continue in the months ahead. The relatively short interest rate duration in the portfolio reduces fluctuations in an otherwise volatile bond market,” the fund said.
