Monday evening was the culmination of two and a half years work for Flemming Ipsen, who in January 2013 received the task of getting the crisis-stricken carrier Torm out of trouble and back on a track, that could breathe life back into the company. With a corporate statement Monday evening, he announced along with the rest of the carrier that the fight was over - a final restructuring was in place.
"The feeling yesterday was overwhelming relief on behalf of the company. For the past two and a half years, I have grown an affection and understanding of the spirit in this house and I would have been sick if we had not succeeded yesterday," Flemming Ipsen says Tuesday in an interview with ShippingWatch at the Torm headquarters in Copenhagen.
"It has been a long and necessary road to the final restructuring and we are very pleased that we did not lose the patient during the operation. I am filled with relief - and although it can be hard to say in this country - I am left with a sense of pride that we were able to get Torm back on track. We may have continuously said to the public that the work was going as it was supposed to, but I have had my doubts about whether it would actually be successful."
Four months of intense uncertainty
Some periods have been worse than others since January 2013, when the previous lenders in Torm pointed to Flemming Ipsen to head the cleanup that the company desperately needed after severe financial problems brought on by the crisis. The banks backing Torm granted Flemming Ipsen the authority to settle a deal and he was given this responsibility because his shipping experience including 35 years at Maersk Group, has provided him with the right foundation for the job.
Especially one period was particularly bad. From late fall 2014 and until March of this year.
"It was practically every other day that I went home thinking: this won't fly at all. There was so much movement in the work in so many positions, and points where people just couldn't meet. There were constant deadlines to reach in order to get the necessary capital and these deadlines were constantly exceeded, and before we could go the rounds with the investors again, practically even more deadlines were exceeded. Fortunately, the day-to-day management took the lead and did not back down," says Flemming Ipsen.
He explains that one of the major supporters in the restructuring work was Danske Bank. The bank gave up on pulling out of Torm in the summer of 2014, although this was the bank's original intention. After that, the bank changed course.
"Danske Bank has been very active and constructive in finding the final solution. Without their drive and commitment, I'm not sure that there would be a Torm today - or that we would be sitting here." says Flemming Ipsen.
Two big decisions
The tough odds for getting Torm through and in on the deal, which has provided the carrier with a cash pile of USD 125 million, has required difficult decisions, and especially two have been decisive, according to the departing Chairman.
First of all, was to sell Torm's entire dry bulk business. This decision was made in the summer of 2013, regarding Torm's fleet of almost 40 dry bulk vessels at the time, although only a few were owned by the carrier.
"We did not know the future of the dry bulk market which later went completely down into the dumps, but we were pretty convinced that there was no pot of gold at the end of the dry bulk rainbow. We wanted a carrier that was as clean as possible, but this was still a radical decision as a big part of shipping holds on to the the idea that supplementary segments are good. Based on my own history, I happen to have the opinion that you cannot make up for losses in one area with profits in another, when you work in a tramp market. I am pleased with that belief today, because if we had stayed in bulk, it would have been horrible," says Flemming Ipsen.
The second tough decision during the reconstruction work was withstanding the lenders pressure to outsource the technical operations from Torm's own headquarters to other companies. Flemming Ipsen and the board went over every line of text in the financial reports and expense accounts several times to find savings - and to contract technical operations out would have provided a direct savings. Torm's expense for technical operations is in the range of USD 150 million a year.
"If we had outsourced - and this is always easier to say afterwards - we would have in my best opinion, not been as able to find a long-term solution to the problems. I think the collaboration between the commercial and the technical operations has been significant for maintaining a meaningful platform for the carrier," says Flemming Ipsen.
Rise of the Phoenix
Following the years of long negotiations, numerous replacements in the stockholder circle, and great uncertainty, the soon departing Chairman believes that it is the rise of a Phoenix, which he is presenting to the new board.
"In my honest view, Torm now has an incredibly strong setup and balance which provides great freedom in the future."
In his opinion, the strong setup is constituted by the fact that the restructuring deal entailed Torm's debt being reduced to below 50 percent of the worth of the net assets, which should be compared to the fact that at one point in time, the debt was between 165 and 175 percent of the net assets' value. At the same time, Torm has landed a strong major shareholder in Oaktree, which is injecting a total of 31 vessels - existing and newbuildings - into Torm's fleet. This injection will lift Torm's fleet to 74 vessels. Add to this, the mentioned working capital.
"All in all, this constitutes the rise of a Phoenix - a carrier with all the right ingredients - not least the knowhow and history as well as the freedom to grow and make quick decisions. In shipping, it's incredibly important that you are geared to make fast decisions because you are always in a relatively volatile market where the point is to exploit opportunities. With this deal, a very big change has taken place for the day-to-day management here, which can now take off the elbow pads and stop putting out fires, to instead run a business," says Flemming Ipsen.
With the new size of Torm's fleet, the carrier is among the two largest product tanker carriers in the world, with Scorpio Tankers as the other. One competitor, which Torm expects to beat along with the other players in the market, which are all benefiting from a strong market in product tanker.
"We have made a big deal out of comparing ourselves with our competition month to month and our statistics are so good that for many months in a row, we have been able to prove that Torm as a platform has performed better and in some cases much better than our competitors. At Torm, we are capable of more than praying and although we don't have the youngest fleet, we have been successful with a sound business practice. If you can maintain this cadence going forward, Torm will continue to stand strong," says Flemming Ipsen.
The work for Torm will continue during July and August where the carrier will hand in an IPO prospectus to the Danish FSA - a prospectus where the new shares will be listed as information for all shareholders. This will be handed in on Friday and according to plan, it will be approved at the end of July. Then Torm will have an extraordinary general assembly which will be the last task for Flemming Ipsen before he leaves Torm and continues his work in positions on other boards.