OSLO, Feb 11 (Reuters) - Bulk shipping group Golden Ocean Group Ltd said it might have to raise capital after two financing deals fell through and two vessels on charter were returned, sending its shares down as much as 30 percent.
Bermuda-registered Golden Ocean said on Wednesday its main shareholder, Norwegian shipping tycoon John Fredriksen, was willing to contribute to a capital increase on condition that the company agreed changes in its loan documentation with creditors.
Several shipping groups are struggling to survive as the global economic downturn hits the industry hard. Freight rates in the dry bulk market have fallen more than 90 percent from the peak last May.
Golden Ocean shares fell 30 percent to a 10-day low at 4.67 crowns after the announcement on Wednesday, but pared some losses to be down 25.7 percent by 1218 GMT.
Golden Ocean has been hit by several problems. The company said it had agreed to scrap financing agreements with Ship Finance for two Capesize vessels being built at Daehan Shipbuilding in South Korea and was seeking alternative funding.
'The company is in discussions with banks to replace these two financing agreements as well as seeking financing for the 10 ships the company presently has unfinanced,' Golden Ocean said.
Separately, Golden Ocean said two Panamax vessels had been returned from a charter to a Spanish cement producer after the cargo freighter had hit financing problems, resulting in a loss for Golden Ocean of about $32 million.
The company also said it had slashed the price of a deal to sell a Panamax vessel by 34 percent.
'Everything is the result of counterparties that cannot deliver on their commitments, and the underlying reason is the collapse in the dry bulk market,' analyst Martin Sommerseth Jaer at Arctic Securities said.
Jaer said he estimated Golden Ocean would need $300 million to $400 million in new capital 'to be on the safe side'. He said Fredriksen's participation was positive, but recommended selling Golden Ocean shares even after Wednesday's plunge.
The major condition for Fredriksen to contribute to a capital increase is that the company can agree acceptable changes in the loan documentation with its banks as well as the holders of the company's convertible bonds, Golden Ocean said.
'It's a double whammy -- I believe the blip of strength in the dry bulk market over the past week won't last, and then there are the financial problems,' Jaer said.
Golden Ocean Chief Financial Officer Geir Karlsen said it was too early to say how much capital it would need. He said the company will give further details when it announces fourth-quarter results on Feb. 26.
The dry bulk shipper said it would hold talks with banks and bond holders to discuss potential changes to loan agreements.
'Such changes might be needed so that the company is in compliance with existing lending facilities going forward. Golden Ocean has also started discussions with the shipyards and other specific creditors in order to achieve reliefs in the company's contracts and agreements,' it said.
'This includes, among other items, cancellations of newbuilding contracts, but as of today no agreements have been made.'
(Editing by Erica Billingham) Keywords: GOLDENOCEAN/ (richard.solem@thomsonreuters.com; +47 22 93 69 71; Reuters Messaging: richard.solem.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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