Brightoil Petroleum Holdings Ltd., a supplier of marine fuel, headed for the biggest decline in at least three months in Hong Kong trading after saying it’s seeking waivers from lenders to prevent a possible loan default.
The stock slumped 11 percent to to HK$1.51 at 11:56 am, set for the biggest decline since Sept. 26. Earlier Brightoil fell 12 percent, the most since February 2011. The city’s benchmark Hang Seng Index declined 0.4 percent.
Brightoil has breached the interest coverage ratio covenant on at least one of its loans, the company said in a statement yesterday. A default on that loan may trigger other loan defaults, it said.
“It’s really a serious problem as the company cannot even generate enough cash to pay the minimum bank interest,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “Brightoil would have to sell some of its assets to pay debt if it fails to reach agreement with its creditors.”
Brightoil “is in the process of applying for relevant waivers from the lenders,” the company said in the statement, without naming the lenders. “The group is in the process of seeking to determine what proportion of its long-term portion of vessel financing may need to be reclassified from non-current liabilities to current liabilities in the 2013 interim result.”
It also expects to have a “material loss” in the six months ended Dec. 31, from a profit a year ago, because of depressed market conditions in the shipping industry and falling bunker margins, the company said. The interim result is expected to be released before the end of February, it said.