Russian Tanker Giant Considers Selling Up One-Third Of Its Fleet

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  • The Russian company is working fast for an eventual return to international trade post-sanctions.
  • Sovcomflot management has not responded to requests to discuss the deals.
  • The ensuing legal battle has seen leasing companies make claims that could top $10bn, according to Fitch Ratings. 

As the Russian state tanker giant attempts to repay outstanding western loans before limits take effect, up to a third of Sovcomflot’s owned fleet is available for grabs as reported by Lloyd’s List.

Financial commitments 

The Russian company is working fast to ensure financial commitments and relationships with banks and charterers remain intact, ready for an eventual return to international trade post-sanctions Russia’s tanker giant Sovcomflot is looking to sell up to one-third of its fleet, in a bid to repay loans to western banks and financiers before the UK and European Union governments’ wind-down orders take effect on May 15.

Both jurisdictions have set May 15 as the deadline for cutting ties.

Sovcomflot management has not responded to requests to discuss the deals.

However, the last available consolidated accounts detail $2.1bn of debt, made up of short- and long-term bank loans.

The accounts do not detail how much of that is owed to western lenders.

Leasing companies

According to those dealing directly with Sovcomflot, the process is being conducted in a “genuine and very professional manner”, indicating that Sovcomflot senior management is seeking to maintain relationships with financiers and charterers beyond the current sanctions.

While the strategic goal of its fleet sale has not been directly discussed as part of the sale negotiations, senior bankers are working under the assumption that management is trying to ensure its eventual return to the international market when sanctions are eventually lifted.

It made clear its intention to meet its financial obligations despite sanction restrictions curtailing its ability to make payments.

The ensuing legal battle has seen leasing companies make claims that could top $10bn, according to Fitch Ratings.

The options for vessels, however, are significantly more limited than for aircraft.

Industry sources also suggest the company, which is well regarded in the industry as one of the leading technical managers of vessels and a financially solid counterparty, will have noted the decimation of Iran’s sanctioned fleet.

Severe restrictions

Regardless of whether Iranian sanctions are eventually lifted, with an average age of 17 years and 35% of the fleet more than 20 years old, NITC ships will face severe restrictions if they ever return to the open market.

Meanwhile, all five of the International Group P&I clubs that have until now insured Sovcomflot tonnage have either terminated their contracts or are in the process of doing so, according to senior sources in the sector.

British clubs West of England, North and UK Club have all publicly confirmed the move.

“I can’t see how [SCF] can possibly trade within Europe.”

That’s a political position and will depend on public opinion.

At the time of publication, the company had not responded.

 

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Source: Lloyd’s List

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