Indonesian shipper hopes for $2 billion debt restructure by year-end

Indonesia's PT Berlian Laju Tanker , the world's third-largest chemical shipper, hopes to restructure its $1.9 billion debt by the year-end and will switch its focus to niche liquid chemical and gas transport, its founder and chairman said in a rare media interview.

The country's leading oil and gas shipper defaulted on several debt instruments earlier this year and has been talking to creditors about restructuring its operations and finances. Its shares were suspended in late-January when it froze payments on its debt, and its market value has collapsed to $236 million - down 90 percent from the shipping boom of early 2008.

"We want the process to be faster. We hope all things can be sorted out by the end of the year," Hadi Surya, a 76-year-old millionaire fine wine collector, told Reuters in his 12th-floor office overlooking downtown Jakarta. "Our main focus is for the survival of Berlian Laju and to overcome the crisis."

Berlian Laju, founded in 1981 and also listed in Singapore, is the latest shipping firm to be squeezed between weak freight rates and higher shipping fuel costs in an oil tanker market struggling through the global downturn. Shipbuilders and freight groups from Japan to Italy and Germany have gone out of business or are scrambling to renegotiate with creditors.

On Tuesday, debt-laden Danish shipper Torm A/S announced a rescue deal that would see banks take control of the company, extend repayments on $1.8 billion of debt and provide fresh funds, buying time for the tanker market to improve. Lenders generally, though, are increasingly wary of shipping finance as credit tightens globally, and ratings agencies have cut Berlian Laju's credit ratings to default.

The industry binged in 2007-08, ordering new ships that are now being delivered. This over capacity comes as demand, particularly on the once lucrative routes between Europe and Asia, falls through the floor.

The Baltic Exchange's Dry Index , an indicator of global economic activity, has dropped by a quarter since end-June, dented by a slowdown in China, the world's second-largest economy. The index is down almost 60 percent from a year ago.

NICHE FOCUS

Surya said Berlian Laju will strengthen its business in liquid chemical and gas shipping - and trim its oil shipping activities - once the debt restructuring process is completed. Per capita spending on chemicals in Asia is relatively low, but is expected to increase over the coming decades, he said.

"Today, shipping is still struggling ... and it could be for quite some time, but we will focus in a niche market of liquid chemical and gas," he said, wearing a sports shirt after his weekly round of golf with company executives.

The daily rate for a 25,000 deadweight tonne (DWT) chemical transporter is currently $28,000-$30,000, while a 200,000 DWT dry-bulk tanker can be leased for less than $10,000 a day, showing the potential upside in the specialist chemical shipping business, said Surya, who controls a near-38 percent stake in the company.

Berlian Laju - which translates into English as Fast Diamond - may also set up a coal floating storage business once the restructuring is done. Indonesia is the world's largest thermal coal exporter.

SETTING SALE?

Berlian Laju's problems were compounded by loans it took out to fund its $850 million acquisition of U.S.-based Chembulk at the peak of the shipping market in 2007. According to its latest financial statement, it has outstanding debt of $1.9 billion, with about $418 million in principal payments due this financial year. Those repayments were frozen early this year.

The shipper's debt-to-equity ratio is among the highest of its Indonesian peers at 1.7 times. PT Humpuss Intermoda Transportasi has a gearing of almost 1.5 times and PT Trada Maritime is at 0.5 times, Thomson Reuters StarMine data shows.

Berlian Laju has until November 13 to agree a restructuring plan with its creditors after it won a 90-day extension in August. It has appointed Borrelli Walsh to advise it on the restructuring. Surya declined to discuss details of the plan, but said it may include the sale of vessels.

Surya said Berlian Laju offered to pay global bondholders at 20 cents to the dollar, while fully repaying its Indonesian bondholders, but over a longer period of time. According to its financial records, Berlian Laju owed $145 million in global bonds and more than $150 million in local bonds.

A consortium of international banks provided Berlian Laju with a $685 million debt facility in February 2011, secured by 40 of the company's existing ships and three ships under construction. The shipper has a total of 93 vessels, according to its website.

Asked if Berlian Laju may have to go into liquidation to settle its debts, Surya said: "We have to accept the reality. I can only pray and this is not the time to blame my directors for the over-expansion in 2008. We always have risks in business."