Primorsk in bankruptcy, inks agreement in principle with bondholders

By Caroline Salls

Pittsburgh, Jan. 19 – Primorsk International Shipping Ltd. filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the Southern District of New York.

According to a statement filed with the court by Primorsk chief restructuring officer Holly Felder Etlin, the company reached an agreement in principle with its majority bondholders that it believes will garner significant other bondholder support as part of a Chapter 11 plan of reorganization.

Specifically, Felder Etlin said the agreement calls for the conversion of Primorsk’s Norwegian bonds into equity of the reorganized debtors.

Restructuring terms

Key terms of the agreement in principle include the following:

• The Primorsk debtors would assume new and existing long-term charter arrangements, with charter rates at least as favorable as the recently improved charter arrangements in place on the bankruptcy filing date;

• The proposed plan and the prosecution of the Chapter 11 cases would be funded from existing cash and cash generated from operations during the cases. There would be no debtor-in-possession financing;

• The proposed plan would discharge all claims against the debtors arising under the Norwegian bonds in exchange for equity in the reorganized company;

• Reorganized equityholders of Norwegian bonds would receive up to 75% of the fully diluted issued share capital of the reorganized Primorsk. The remaining share capital of reorganized Primorsk would be allocated to the existing shareholders and the company’s executive directors;

• The proposed plan would leave any liens securing secured debt in place and discharge secured debt in exchange for replacement instruments in the form of dollar-denominated senior secured bonds. The company and the large holders of Norwegian bonds would work to achieve consensus with holders of secured debt on the appropriate tenor and interest rates for the replacement instruments before soliciting approval or seeking confirmation of the plan of reorganization; and

• The proposed plan would provide for the assumption of management arrangements with Prisco (Singapore) Pte Ltd., which would be equally or more favorable to the Primorsk debtors than the existing arrangements.

Felder Etlin said the company is in discussions with representatives of the Norwegian bondholders to finalize and document this agreement in a restructuring support agreement or other written understanding.

In connection with the bankruptcy filing, the company requested court approval to use $2.7 million in cash collateral of its pre-bankruptcy lenders to fund its operations while in bankruptcy.

The interim cash collateral hearing is scheduled for Jan. 20.

Debt details

According to court documents, Primorsk had about $364 million in total assets and $357 million of total debt as of Dec. 31.

The company’s largest unsecured creditor is Nordic Trustee ASA, based in Oslo, Norway, with an $80.87 million bond debt claim. No other unsecured creditors were listed with claims of $1 million or more.

Apington Investments Ltd. owns 100% of Primorsk’s equity.

The company is represented by Sullivan & Cromwell LLP.

Primorsk is a Nicosia, Cyprus-based Arctic oil shipper. The Chapter 11 case number is 16-10073.

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