Positive market conditions have allowed Torm to secure three new loans worth a combined $496m, which will refinance its existing facilities ahead of schedule, the company's chief financial officer Kim Balle has told TradeWinds.
The two separate term facilities and a revolving credit facility together replace four term loans and Torm's existing revolving credit facility, which together accounted for up to $502m in debt when fully drawn.
After refinancing the facilities, the product tanker operator does not have any major debt maturities until 2026.
The Danish firm previously had $252m in repayments scheduled for 2021, of which $177m had been drawn.
"Torm’s new debt repayment profile further strengthens our capital structure and supports financial and strategic flexibility for our company," Balle said.
The refinancing means Torm has reduced its near-term and medium-term debt and lease repayments to an average annual level of $108m until 2025.
No pricing for the facilities was disclosed, but Balle said the deals were closed on "attractive terms".
Old and new
The two term facilities finance Torm's older vessels and more modern tonnage separately.
Twenty seven of the tanker company's modern vessels are covered by a syndicated term facility of up to $341m, which matures in 2026.
The banking syndicate that provided the facility is made of Danske Bank, ING, ABN Amro, Nordea, Swedbank, Credit Agricole CIB and Societe Generale.
The syndicate also provided Torm with a $45m revolving credit facility, scheduled to mature in 2026.
Hamburg Commercial Bank has financed 19 of Torm's older vessels, all built between 2002 and 2006, with a new term facility of up to $110m that matures in 2025.
Balle told TradeWinds that financing the older vessels with a separate loan was an opportunity that arose during talks with banks.
As it turned out, he said, Hamburg Commercial Bank has a special niche in financing older vessels and was able to provide a separate facility.
Pushing the button
Balle told TradeWinds that economic conditions and a strong freight market made it a good time for Torm to initiate the refinancing at the end of 2019.
"The data was there and we could see that the interest [from banks] was good," Balle said.
"We could see that there was an interest also for a [loan] tenor of five to six years, which was great."
The end result is something that Balle said is a "very flexible package, both when it comes to tenor, repayment and of course also commercial terms".
In fact, Torm found itself with more financiers than expected, Balle said.
"I would say we could probably have been satisfied with the bank group with one or two banks fewer than where we arrived, but the interest was strong," he said.
"We are basically just very happy that we have been able to attract banks we knew already and also some new banks to Torm — banks that have been in previously but have returned to us as lenders like Nordea and Societe Generale."
The refinancing will only have a minor impact on Torm’s net loan-to-value, which was 50% as of 30 September last year, within the company's target range.
"Having a conservative net loan-to-value gives us the opportunity rather than being too constrained," Balle told TradeWinds.
"Financial flexibility is just so important for us to either delever — you know, this is a good market — or it could also be that there are some commercial opportunities that pan out during the year."
After completing sale-and-leaseback deals for six vessels during the third quarter of 2019 alone, Balle told TradeWinds that the company is not currently engaged in any discussions for any further transactions.
Such deals, however, will remain in Torm's toolbox to pull out if needed, he said.
Torm still aims to pay out between 25% and 50% of its net profit to shareholders this year, as is the company's general policy.
As to whether the payout will comprise dividends or share buybacks, Balle said Torm would "cross that bridge when we come to it".
