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Five banks to decide Torm's future

The number of banks with stakes in Torm has dwindled down to five. The Chinese are completely out, and now the decision regarding the future ownership structure is de facto in the hands of European banks.

Torms CEO Jacob Meldgaard

Even though the number of banks with lending stakes in Torm has dwindled to five it could still be some time before the major Danish tanker carrier is able to reach a long-term debt agreement - an agreement that the carrier has been working toward for many months now.

Among the positives are the fact that the tangle of banks - 13 in total, including a few Chinese banks - that originally formed the restructuring agreement that kept Torm afloat has now been reduced to just a handful. Today the following banks have stakes in the carrier's massive debt and are the ones continuously negotiating with potential investors:

  • Danske Bank
  • HSH
  • SEB
  • HSBC
  • DDS / Singapore

According to ShippingWatch's sources the banks are frequently meeting with equity funds and other investors showing an interest in acquiring the debt, and thus taking over the de facto ownership of Torm and the real decisive responsibility for the carrier's future. But this process has not yet resulted in a clarification.

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If and when a breakthrough happens, it really only hinges on one factor, namely when the five banks will be willing to reduce the price of their debt sufficiently for one or more investors to eye a solid business case in entering at this point in time.

As ShippingWatch reported earlier this year, Nordea withdrew from the pool of banks and sold its stake for USD 166 million to an unnamed investor. At the time the bank had to shave off approximately one third of the price in order to find a buyer, as the price according to ShippingWatch's sources was some 65-70 percent of the original figure.

EU's role

The European Central Bank (ECB) could end up playing an indirect part in the banks' engagement in Torm as the ECB is getting ready to take over supervision of around 150 major banks as a consequence of the banks' behavior ahead of the global financial crisis. This process will increase the requirements for the banks' - not least several of the German banks' - capital resources.

And the news that Nordea sold its stake at a fairly low price could play a part, as a source central to the process told ShippingWatch a few weeks ago:

"For a long time the major accounting firms bought into the German banks' explanations. Now we're looking at a situation where certain banks in large syndicates, as in Torm, for example, have started divesting their lending stakes at around 60-70 cent to the dollar. This does not fit with the fact that German banks have till now demanded 90 or 95 cent to the dollar, and the banks' accountants are now questioning this development big-time. This has increased the pressure on the banks significantly."

Lloyd's List reports on Monday that three sources inform the newspaper that Danske Bank is also looking to divest its stake in Torm, but that there are few interested buyers.

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