Financial Daily from THE HINDU group of publications
Friday, May 10, 2002
SCI panel against $33-m bridge loan to Greenfield
NEW DELHI, May 9
A SUB-COMMITTEE set up by the board of Shipping Corporation of India (SCI) is not in favour of providing a bridge loan of $33 million to the troubled Greenfield Shipping Company to help it manage the cash-crunch. The stage is thereby set for a confrontation with the other joint venture partners - - Japan's Mitsui O.S.K.Lines and Government of the Sultanate of Oman.
The five-member sub-committee after deliberations spread over three sittings was of the view that the problems facing Greenfield was not of SCI's making and hence any consequences for non-payment of $33 million, including exiting from the project, should take into account a "fair compensation" to be paid to SCI, sources aware of the developments said.
"The board of SCI is expected to meet in the next few days to consider the recommendations of the sub-committee and take a final view on the matter," the sources said.
SCI has invested $11 million for a 20 per cent stake in Greenfield, a joint venture company registered in the Cayman Islands for owning and operating a 1,37,000 cubic metre capacity LNG tanker for the now-controversial Dabhol Power Company (DPC).
Mitsui and the Government of the Sultanate of Oman, which holds 40 per cent stake apiece in Greenfield, had asked SCI to contribute a bridge loan of $33 million either in cash or by providing a bank guarantee from a bank having a rating of not less than A - (A Minus) to retire the original senior loan of $110 million taken from a consortium of banks led by ANZ Investment Bank.
The bridge loan was to be given by all the three joint venture partners in proportion to their equity holdings at 80 basis points above Libor.
"But, no single Indian bank with an A- rating is willing to extend a loan of $33 million in view of the cash flow problems facing LNG Laxmi," the sources said.
If SCI were to approach a foreign bank to arrange for the $33 million, it will result in a total liability of about $ 40 million which would have to be shown on the balance sheet of SCI, thereby reducing SCI's borrowing capacity to that extent.
The board sub-committee felt that the Oman Government should take the blame for the crisis facing Greenfield. "The Oman Government has not honoured its obligation with respect to the new time charter party agreement signed with Greenfield," the sources said.
After the time charter party agreement with DPC was annulled and the Oman Government became the new charterer besides acquiring a 40 per cent stake in Greenfield, the plan was to sub-charter the ship to Oman LNG.
Significantly, the Oman Government is understood to have said that it is not possible to sub-charter the vessel to its subsidiary, Oman LNG, for several reasons. This has raised doubts over the certainty of cash flows from chartering out LNG Laxmi.
The vessel is now being deployed with Oman LNG for undertaking 9 voyages to France.
Meanwhile, Gulf International Bank, which was mandated to raise funds for the project, has not made much progress on the matter as the charter party agreement signed with Oman Government could not be enforced so far.
The Gulf International Bank has re-valued LNG Laxmi at $160 million as against the original building price of $222.5 million.
"The cash flow problems facing LNG Laxmi has made a tremendous impact on the net worth of Greenfield. There is very little equity left in the project now," the sources said.
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