Frontline Ltd., the oil-tanker company led by billionaire John Fredriksen, slumped to a two-week low in Oslo trading amid speculation it may need to sell shares to raise capital.
Shares in the Hamilton, Bermuda-based company fell as much as 6.3 percent to 11.25 kroner, the lowest level since May 16, and were down 4 percent as of 11:54 a.m. in the Norwegian capital, making it the biggest decliner in the Oslo stock exchange benchmark index. More than 250,000 shares have traded so far today, about 87 percent of the three-month average daily volume.
“With expectations of its cash burn to accelerate going forward, we expect the company to restructure and a share issue should not come as a surprise,” analysts at Danske Bank A/S said in a note. Danske has a sell rating on the stock and price estimate of 6 kroner a share.
Frontline, which owns a fleet of very large crude carriers, or VLCCs, and Suezmax tankers, yesterday posted its fourth consecutive quarterly loss amid an oversupply of tankers that has driven down prices. If the market doesn’t recover and it can’t raise equity or sell assets, the company may run out of cash, it said. It has $225 million of convertible bonds due in April 2015.
The tanker market is “massively oversupplied” and it may take some time before a reasonable market balance is restored and sustained recovery of the tanker market occurs, Frontline said in a statement.
Frontline reported a decline in first-quarter sales to $126 million from $149 million a year earlier, and net loss of $18.8 million, it said yesterday.