Problems mount at World Wide Supply as covenant breachedNews // November 2, 2015
World Wide Supply AS says it has breached a liquidity covenant as a result of losing key contracts with Brazil's state oil company Petrobras.
On 16 September World Wide Supply received notice of termination of two of four long term contracts with Petrobras following a three month blocking period. The termination came about when the company's Certificate of Charter Authorisation (CAA) was not renewed. The renewal of the CAA for the two ships was blocked by a Brazilian-flagged vessel which, according to Brazilian law, has preferential right to employment.
In a sattement, World Wide Supply said: "Via the company's Brazilian lawyer, Petrobras has been notified that the termination is considered unlawful as the employment has not been conveyed to the Brazilian-flagged vessel. The company has also informed Petrobras that they have a contractual obligation to pay for hire during the three month blocking period, which is equivalent to approximately US$4.0 million."
World Wide Supply said termination of the contracts means that it has two of the four vessels employed. These two remaining contracts expire in June 2018, based on renewal of the CAAs in June 2016 and June 2017. It said its liquidity has now been reduced to US$5.6 million as of 30 September 2015.
"The company is thus in breach of the minimum liquidity covenant of US$7.5 million set out in a bond loan agreement with Nordic Trustee. The company's liquidity will remain below the covenant in the loan agreement," it said.
On behalf of the bondholders, Nordic Trustee has issued a letter dated 23 October 2015 giving notice that a default has occurred under the bond loan agreement. Nordic Trustee is entitled to declare default and terminate the loan if the default is not remedied within 20 business day (20 November 2015).
World Wide Supply said the board and management of the issuer have assessed the situation and conclude that the company will not be able to service the debt. They have therefore submitted an action plan to Nordic Trustee. The plan contains what World Wide Supply said were "targeted measures to increase the company's cashflow and reduce debt levels."