Cecon Surges on Reaching Vessel Loan Accord With EDC: Oslo Mover
Cecon ASA (CECON), a Norwegian owner of pipe-laying ships, rose the most in almost 21 months in Oslo after signing a deal to ensure the construction of three ships on order from a struggling yard.
Cecon rose as much as 72 percent, the most since July 2010, and was up 55 percent to 2.8 kroner as of 2:24 p.m. in the Norwegian capital. The stock had gained 16 percent this year before today’s move.
The deal to acquire the rights to a $200 million loan from Export Development Canada makes way for the construction of three vessels Cecon has on order at the Davie Yard in Levis, Canada, the Arendal-based company said in a statement. The cost to complete the three vessels and settle the deal with EDC will be as much as $270 million, Cecon said.
“They basically get three new SURF vessels for $250 million to $270 million plus bond debt of around $77 million including deferred interest,” Kristoffer Riis Iden, an analyst at Arctic Securities ASA, said by phone. “You probably would have to pay around $160 million ordering a similar vessel today.”
Cecon has been in talks with an international bank to secure sufficient financing and payment guarantees before entering a final contract, the company said.
“In order to resume activity at the yard, the Canadian export agency has agreed to take a haircut on the debt,” Iden said. The loss on the loan could be as much as 80 percent, said the analyst, who has a buy recommendation on the share and a 5 krone price target.
Davie Yard was acquired by Upper Lakes Group Inc. and SNC Lavalin Group Inc. after Davie Yards Inc. entered bankruptcy protection in 2010.
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