* Q2 net loss $78 mln vs forecast $30 mln loss
* Firm has around $1 bln in debt and lease obligations
* Shares down 9.2 pct
(Adds analyst, updates share)
OSLO, Aug 28 Norwegian shipping firm Frontline
said it may have to renegotiate debt and lease
obligations as it reported a larger-than-expected second-quarter
loss on Thursday.
The tanker industry has been depressed for years because of
an oversupply of vessels. Frontline, part of tycoon John
Fredriksen's business empire, has already undergone major
change, splitting in two and shedding costly new-build contracts
But the downturn has been longer than most in the industry
predicted and Frontline warned in May that it may have to
restructure further to repay debt.
"Despite the improved tanker market experienced so far in
the third quarter, the company is in a challenging situation
with $1,031 million in debt and lease obligations as of June 30,
2014," Frontline said in a statement.
It said that, based on the current tanker market outlook, it
was doubtful whether it could generate enough cash from
operations to repay a $190 million convertible bond maturing in
"In my view there is a good chance that a restructuring will
be painful for shareholders," said Ole Stenhagen, an analyst at
bank SEB, who has a "sell" recommendation on the stock.
"You could imagine there might be dilution - there might be
conversion of the convertible loan into equity."
Main shareholder Fredriksen, one of the world's richest men,
is expected to play a key role in any restructuring, as he did
when Frontline was split in two. At the time, he provided a
half-billion dollar guarantee to get the deal done.
"The Fredriksen group has a good history in taking
responsibility and acting fairly in those kinds of situations,"
Shares in Frontline were down 9.45 percent at 0900 GMT. The
shares are down 35 percent since the beginning of the year,
while the Oslo benchmark index is up 12 percent.
The company made a net loss of $78 million in the second
quarter, worse than the consensus forecast of a $30 million loss
in a Reuters poll of analysts, compared with a loss of $120
million in the year-ago period.
The results were affected by impairments of $56 million due
to lower than expected future earnings for some of its vessels.
(Reporting by Gwladys Fouche; editing by Ole Petter Skonnord
and Tom Pfeiffer)