Shipping company says it has written off accumulated losses worth $300m as part of turnaround plan
UAE shipper Gulf Navigation said on Wednesday it had cut its capital by two-thirds and written off accumulated losses worth AED1.1 billion ($300 million), key parts of a turnaround plan designed to solve its debt problems.
The company's capital has been reduced to AED551 million from AED1.66 billion, it said in a statement on the Dubai bourse, with the reverse stock split effectively creating one share for every three existing shares.
The accounting technique allows the firm to use its own capital base to expunge its debts.
Dubai's only listed crude oil shipper has been in talks with creditors for months after an ambitious expansion plan at the end of the last decade crippled the company, as oversupply hit the oil tanker business and transport rates plummeted.
Shareholders of the shipping firm approved in January measures to turn around the company, which included the reverse stock split, issuing a $130 million convertible bond and selling two of its very large crude carriers (VLCCs).
The convertible bond will be part of the firm's attempts to raise fresh capital and rebuild its business, which will include a new phase of expansion: acquiring chemical or products tankers or other new vessels.
The company is considering whether to hire an investment banker with experience in the shipping industry and in raising capital, who would coordinate the expansion, it added.
"The company is in a much better position to present its investment proposal before new investors across the world," the statement said, citing improved profitability seen in the first quarter and expected in the second quarter.
Shares in Gulf Navigation slumped 7.9 percent to close at 0.69 dirham on Wednesday, taking year-to-date losses to 42.5 percent. This contrasts with a 33.8 percent increase in the wider Dubai market.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.