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ECONOMYNEXT –Sri Lanka’s Mercantile Shipping Company is to sell two cargo ships owned by a subsidiary, Mercantile Emerald Shipping (Private) Limited’s (MESL), which has been unable to repay foreign borrowings amid mounting losses.
The move will help revive Mercantile Shipping as a going concern and be taken off the watch list of the Colombo stock exchange.
Mercantile Shipping said in a stock exchange filing the two ships, Mercs Uva and Mercs Uhana, have been mortgaged to Bremer Landesbank-Germany, now merged with Norddeutsche Landesbank, from which Emerald has borrowed.
Mercantile Shipping has written off the 237.6 million rupees it invested in the Emerald Shipping subsidiary which has been making continuous losses and is unable to make capital and interest payments on its debt.
The book value of the ships owned by Emerald Shipping after impairment was given as 13.2 million US dollars as at 31 Match 2019.
But the broker’s estimated of the sale value of each ship is about 4.8 – 5.1 million dollars as at July 2019.
The group has been in talks with Bremer Landesbank on rescheduling the loan of its subsidiary Mercantile Emerald Shipping which it has guaranteed.
Under the mortgage, the bank can seize the ships and sell them.
The loan outstanding is 22.5 million dollars and interest outstanding is a million dollars.
Mercantile Emerald Shipping lost just over a million dollars in the year to 31 March 2019 with accumulated losses now 15.3 million dollars.
Mercantile Shipping said it has decided to allow the bank to sell the vessels.
Norddeutsche Landesbank has agreed to discharge Mercantile Shipping of all liabilities under the loan deal if it agreed to sell the ships.
(COLOMBO, 29 July, 2019)