Russian shipping group sells sixth of fleet to repay debts

Russia’s biggest shipping group Sovcomflot and its western lenders have sold a sixth of its Kremlin-owned fleet as part of plans to repay debts and eventually return to international markets once sanctions are lifted.

Sales of at least 20 vessels have been completed, according to people familiar with the matter, as the group sought to avoid defaulting on debt and triggering bad loans on the banks’ balance sheets.

This would have damaged the company’s reputation with creditors and oil majors, including Shell and Total, that charter its vessels, say industry figures.

The asset sale comes as energy executives warn Russia’s oil and tanker industry will increasingly resemble Iran and Venezuela, which rely on a “dark fleet” of vessels operating outside international markets. These ships turn off location signals, register under false flags and use shell companies.

The sales, which involved western lenders racing to unwind ties with the company before an EU sanctions deadline on May 15, included four natural gas tankers.

They were sold by Dutch bank ING to Eastern Pacific Shipping, a company owned by Israeli billionaire Idan Ofer.

A further four vessels are now controlled by vehicles set up by Greek mogul Evangelos Marinakis, the owner of football clubs Olympiacos and Nottingham Forest.

Sovcomflot’s action is in contrast to Kremlin-owned Gazprom, whose reputation is in tatters as it risks breaking long-term obligations with some European customers over gas contracts.

Annual accounts show that Russia’s national tanker company had $2.4bn of net debt at the end of last year, but it is unknown how much of this is owed to international creditors and whether it could use its $644mn of cash to repay loans from the banks.

Sovcomflot was founded in 1988 and has become Russia’s largest shipping company with a fleet of 122 vessels at the end of last year, slightly less than half of which carry crude oil.

Russia’s government owns 82.8 per cent of the company. The remaining shares were listed on the Moscow Exchange in October 2020. Its stock has tumbled 60 per cent since then because of sanctions.

ING was the main agent on most of the debt facilities and other western banks that have been trying to reduce their exposure to Sovcomflot include Citibank, Société Générale, KfW and Crédit Agricole. All of the banks did not comment. Sovcomflot did not respond to a request for comment.

Sovcomflot sold many of the ships directly to buyers but in the case of ING, the Dutch group took ownership of the company’s vessels, allowing buyers to transact directly with the lender instead of the sanctioned Russian tanker company. The bank declined to comment.

“I think the banks have been driving the whole process, not Sovcomflot. They want to solve the issue for themselves,” said one industry executive. “They are putting pressure on regulators in Brussels to allow them to run this process.”

Despite the tight deadline to make the sales, the prices fetched for the four LNG carriers were close to their market value of $700mn and they were quickly leased by the original charterer UK oil company Shell, according to industry sources and pricing data from VesselsValue.

“Earnings are so good at the moment, why would the banks facilitate a discounted sale?” said another person with knowledge of the sale prices.

About 40 ships were circulated to possible buyers, according to sources, with more deals expected.

Sovcomflot’s fleet has been registering under different flags with most ships turning to India for classification services — akin to an MOT test but to determine seaworthiness — in a sign of plans for more energy to flow between Moscow and New Delhi, according to an industry source.

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