Gulf Navigation plots turnaround strategy and says it will settle $35m debt

Gulf Navigation plans to settle its $35 million debt this year and is working on a turnaround strategy that includes cost cuts to boost profitability, the shipping company’s new group chief executive said.

Dubai-based Gulf Navigation is negotiating to settle with its creditors. Its board approved in January the first round of a $60 million mandatory convertible bond programme, which it hopes would help to ease pressure from its creditors.

“We are in the process of discussing this (settlement) with some of our stakeholders,” said Khamis Juma Buamim. “We believe this is something we have to clear very fast.”

​Gulf Navigation in February announced a doubling of annual profits for 2015 to Dh20.1m, thanks to growth in the shipping services business, even as it remains in breach of several loan covenants incurred by its VLCC segment, which it has subsequently divested.

The company expects to boost profitability through cost cuts and expansion of the services it offers.

“We are doing a lot of cost analysation and cost reduction in certain areas,” said Mr Buamim. “We will pump more money into profit making parts of the company, create synergy and create value. On the technical services side, we are creating also new tonnage capability which will be added to our overall return.”

Despite the growth in revenue and profit, the company remains in breach of a number of covenant agreements with its lenders. Such breaches, together with about Dh617m of current liabilities at the end of 2015, “indicate the existence of a material uncertainty which may cast significant doubt upon the ability of the group to continue as a going concern”, according to the auditors PwC.

Mr Buamim said the company has enough funds to help settle the debts and expand the company’s services. He declined to disclose the size of the funds.

“We have enough (funds) to sustain the company, ensure that all legacy issues are sorted out and keep moving forward and do our business in a right manner,” said Mr Buamim.

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