Norwegian chemical tanker owner Stolt-Nielsen is ready to endure a prolonged pandemic downturn as it lines up more liquidity.
The company said its target this year during the Covid-19 outbreak has been to secure sufficient cash to weather a "substantial downturn"."We went through each of the businesses and we asked them to go through a scenario, where we did a 20%, 30%, 40% downside in revenue," chief executive Niels Stolt-Nielsen said on a conference call with analysts.
"Not that we necessarily believe it’s going to happen and this is important to stipulate...it’s just a preparation. But we really work under 'hoping for the best, but preparing for the worst'.
An uncertain world
He pointed to uncertainty in the world as it faces the pandemic. "So we want to make certain that we are in a position to ride out whatever comes our way," he said.
At the end of the quarter, Oslo-listed Stolt-Nielsen had $411m of available liquidity, plus $65m of new financing secured by two terminals for which a term sheet has been agreed and credit approved.
The company raised $132m in the Oslo bond market last month.
The CEO said: "We’re also considering an additional $100m revolving credit facility. As it stands right now, we have approximately $465m of cash."
This is enough to repay the bond coming due in the first quarter of March 2021.
"We will have enough liquidity to face a 40% revenue reduction and still be able to meet our obligation and still have liquidity reserves. Again, hoping for the best, but preparing for a prolonged downturn," he said.
More cash potential to be unlocked
The boss also said the company has unencumbered assets, which could be used to raise another $200m.
"We have ample room under our covenants," he added.
"I feel comfortable with the position that we are in. Uncertain times ahead, but I think that whatever comes our way, we will be ready."
Chief financial officer Jens Gruner-Hegge added that with bonds issued in June, the company has cut outstanding debt on the March 2021 bond series to $154m from $232m.
"Many of the bondholders rolled from that bond into the new bond, and we have $159m of regular principal payments," he said.
"Going forward, the $175m bond...is a late 2022 maturity. So there’s lots of time to prepare for that."
The group has net debt of $2.33bn. It posted net earnings in its first quarter to 31 May of $3m, down from $3.5m a year ago, as revenue contracted to just under $504m from $518m.
