Thu 30 Oct 2008 16:47

NYSE suspends trading in Britannia Bulk


Shares in bunker hedge victim deemed 'no longer suitable for trading'.



NYSE Regulation, Inc. announced today that it determined that the common stock of Britannia Bulk Holdings Inc. should be suspended immediately.

In a statement, NYSE Regulation said the security is no longer suitable for trading in light of the company’s news announcements on October 28 and 29, 2008.

Earlier this week, London-based Britannia Bulk Holdings, an international provider of dry bulk shipping and maritime logistics services with a focus on transporting dry bulk commodities in and out of the Baltic region, provided an update on what it referred to as "significant financial and operational matters" prior to the company's upcoming release of its financial and operational results for the three month and the nine month periods ended September 30, 2008.

It was revealed that Lloyd's TSB and Nordea Bank Denmark had provided notice of acceleration and demanded immediate repayment of $158.7 million outstanding on a loan due to a default on the terms.

The company is currently in ongoing negotiations with the lenders regarding a sale of certain of its operating assets to settle this bank default, which if consummated, would not be expected to result in any return to the company's common shareholders. It currently owns 22 vessels, including 12 dry bulk ships.

Britannia Bulk said this week that even though it had not yet concluded the review of its financial results for the three months ended September 30, 2008, the company expected to announce a significant net loss for the period compared to the net income achieved during the second quarter of 2008.

Britannia Bulk said it believed the expected loss will have resulted partly from a bunker fuel hedge operation which is currently uncompetitive following the recent fall in bunker prices. Substantial decreases in dry bulk charter rates, exacerbated by the company's increase in chartered-in capacity during the same period and its entry into the forward freight agreements ("FFAs") are also believed to have been important factors.

Referring to the bunker hedge, Britannia Bulk said "In the three months ended September 30, 2008, the company entered into a bunker fuel hedge which is currently uncompetitive because it is hedged to prices which are significantly above the current market price of bunker fuel. As a result, the company currently estimates that its aggregate bunker fuel hedging losses for the three months ended September 30, 2008 will be significant."

Britannia Bulk said it had entered into a bunker fuel hedge to mitigate the risk of a rise in bunker costs .

"If the company's vessels are employed under contracts of affreightment ("COAs") or spot charters, the freight rates it receives are generally sensitive to the price of bunker fuel. A rise in bunker costs can sometimes have a negative temporary effect on the company's results since freight rates generally adjust upwards only after bunker fuel prices settle at a higher level.

"To mitigate the risk of this temporary effect, and in light of recent substantial movements in the price for bunker fuel, the company has in the past entered into hedging arrangements whereby it purchased a fixed quantity of bunker fuel, calculated against identifiable COAs, at a fixed price to be delivered over a specified period of time," Britannia Bulk said.

In response to what the company referred to as "severe financial difficulties", the Board of Britannia Bulk has also imposed a number of cash conservation and cost reduction measures and has limited management's ability to conduct daily sales and purchases and hedging activities, including entering into any new FFAs or bunker fuel hedge arrangements, without specific Board approval.

In its statement today, NYSE Regulation said it had taken into account the “abnormally low” trading level of Britannia Bulk stocks, which closed at $0.27 on October 28, 2008, with a resultant market capitalization of approximately of $5 million.

Application to the U.S. Securities and Exchange Commission to delist the issue is pending the completion of applicable procedures, as the company will not contest this determination. NYSE Regulation noted that it may, at any time, suspend a security if it believes that continued dealings in the security on the NYSE are not advisable.


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