Awilco LNG has sidestepped a potential covenant breach by forging a new deal with Chinese sale and leaseback company CCB Financial Leasing (CCBFL).
The Norwegian shipowner had a deal in place to 31 December to reduce the amount of cash it needs in the bank.
This stood at $8m on 30 September, which was $6m above the $2m temporary minimum covenant level set to expire on 31 December, according to Fearnley Securities.
But the covenant was due to return $10m after this.
Now Oslo-listed Awilco LNG has agreed another reduction to 30 June, keeping the minimum figure at $2m.
The changes are related to Awilco LNG's 10-year leases on the 156,000-cbm sisterships WilForce and WilPride (both built 2013) from CCBFL.
The positive working capital financial covenant has also been waived.
As a condition, Awilco is now restricted from declaring or paying dividends if the cash balance is lower than $20m.
Markets on the turn
The company is expecting its financial results to improve as the anticipated colder winter, caused by La Nina weather effects, supports a strong LNG shipping market over the next few months.
Chief executive Jon Skule Storheill added: "We are very pleased with the continued support CCBFL has shown the company in this extraordinary and temporary situation underlining the excellent cooperation and positive relationship between the parties."
Awilco LNG's net loss was $6.5m in the third quarter, from a loss of $1.06m a year ago.
Norwegian investment bank Cleaves Securities had said time was running out on covenants for the company last week.
Head of research Joakim Hannisdahl was forecasting a breach of covenants in the fourth quarter.
Ships still have much to give
"With our net asset value assessment at -$11m (NOK -0.76 per share), it seems unfeasible that the company would be able to free up any liquidity from its current balance sheet," he warned.
"The only feasible options seem to be a debt moratorium and/or new equity."
But Cleaves added that although Awilco’s two 2013-built vessels no longer represent the most modern technology, they still have a significant remaining economic life ahead of what we believe will be a very strong expansionary business cycle for LNG carriers from 2024.
"Before then, the financial structure around the vessels likely needs to be improved," Hannisdahl added.
Cleaves has maintained its sell rating on the stock.
