New financial covenants will apply uniformly across the bank debt facilities and will include:
- Minimum liquidity: Cash plus available part of the USD 100 million working capital facility must exceed USD 50 million to be tested from 31 December 2012. This will later adjust to a cash requirement of USD 30 million by 30 September 2014 and USD 40 million by 31 March 2015
- Loan-to-value ratio: A senior loan tranche of USD 1,020 million has been introduced out of the total bank debt of USD 1,793 million as of 30 June 2012. The senior tranche must have an initial agreed ratio of loan to TORM's fleet value (excl. financial lease vessels) below 85% to be confirmed from 30 June 2013. This will gradually step down to 65% by 30 June 2016. The remaining bank debt of USD 773 million will be divided into additional two debt tranches both also have collateral in the vessels
- Consolidated total debt to EBITDA: Initial agreed ratio of maximum 30:1 to be tested from 30June 2013 and gradual step down to a 6:1 ratio by 30 June 2016
- Interest cover ratio: Agreed EBITDA to interest ratio of initially minimum 1.4x by 30 June 2014and gradual step up to 2.5x by 31 December 2015
The terms of the credit facilities will include a catalogue of additional covenants, including amongst others:
- A change-of-control provision with a threshold of 25% of shares or voting rights
- No issuance of new shares or dividend distribution without consent from the lenders
As part of the restructuring documentation, certain specific option rights have been agreed that may result in a sales process to be defined by TORM prior to 31 January 2013 for up to 22 vessels and repayment of the related debt. The options given to three bank facilities, which are subject to certain agreed terms and conditions, have a duration until 31 July 2014. One bank facility has given notice on five of the vessels. TORM will seek to maintain the vessels' association with the Company.
Chartered-in tonnageAs part of the restructuring agreement, the time charter-in partners have accepted that the existing time charter-in contracts will either be permanently changed and rates will be aligned to market level with upside/downside split or allow for termination of the contracts with redelivery of vessels. These amendments result in a significant reduction of the Company's future time charter commitments. TORM estimates that the changes in time charter contracts correspond to a total positive nominal mark-to-market impact on TORM of approximately USD 270 million. A small number of time charter partners are not part of the restructuring. As part of the restructuring, TORM will redeliver 22 vessels ahead of original contract schedule to the time charter partners.
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