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.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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