Gulf Navigation Falls to 2-Week Low After Convertible Bond Plan

Gulf Navigation Holding declined to the lowest in more than two weeks after the Dubai-based owner of oil and chemical ships said it plans to sell a $130 million convertible bond.

The shares lost as much as 6.9 percent to 36.6 fils, the lowest level since Dec. 19, before trading at 37.1 fils at 12:16 p.m in Dubai. The shares have lost 17 percent in the past five days. The company, with a market value of 619 million dirhams ($169 million), also plans to write down almost half its losses, sell vessels and increase the amount of shares foreigners can own to 49 percent, it said in a statement yesterday.

“The shareholders are most probably scared of the dilutive impact of the convertible bonds and my fear is that it will be extremely dilutive,” Sebastien Henin, a portfolio manager at The National Investor, said by phone from Abu Dhabi. “It’s very tough to work in the sector. The very large crude carrier rates are very low and the company is heavily leveraged.”

Shipping companies have struggled as the global financial crisis and sluggish recovery stunted trade and hurt revenue in the industry, coupled with high fuel costs that compounded expenses. Gulf Navigation is cutting crude shipping operations as low freight rates reduced gains.

Shareholders also approved plans to sell its two very large crude carriers, vessels that can transport 2 million barrels of oil, after lenders sought to seize the two ships in a dispute over loan repayments. Gulf Navigation will write down losses to 552 million dirhams from 1.1 billion dirhams, it said in the statement.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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