Naviera Armas Working on Debt Restructuring Proposal; Company Needs Liquidity, No New Money Providers Selected; Debt Cut, Equity Swap for Noteholders Considered

Relevant Documents:
H1’20 Presentation
FY’19 Presentation
2023 Notes OM
2024 Notes OM

Spanish shipping company Naviera Armas is working on a debt restructuring proposal soon to be submitted to its bondholders, sources close to the situation told Reorg. A preliminary proposal would consist of a new money provision to the ferry operator as well as a debt cut for its bondholders, which may convert some of their holdings into equity, sources said. Continue reading for the EMEA Core Credit by Reorg team's update on Naviera Armas working on a debt restructuring proposal, and request a trial for our coverage of other debt restructuring situations in the region. 

Naviera did not reply to a request for comment.

The plan has yet not been negotiated with bondholders, sources said. A noteholders’ group, which is represented by PJT Partners and recently hired Latham Watkins as a legal advisor, is waiting for more information to start official discussions with the company.

Talks will focus on the amount of new money needed - as well as on its provider. Bondholders are expected to urge majority shareholders, the Armas family, to provide the business with money and to potentially move the €50 million proceeds from the company’s sale of vessel Villa de Teror into the restricted group. The bondholders may consider injecting new money if the family is unable to do so.

In parallel, Naviera Armas is asking Spain’s state-owned industrial holding company Sociedad Estatal de Participaciones Industriales (SEPI) for a loan of about €100 million, sources said. In late September, the company obtained a total of €45 million new loans backed by Instituto de Crédito Oficial (ICO) as part of the Spanish government’s Covid-19 Endorsement Program. Naviera also got a €75 million facility from funds HPS and Apollo, secured on certain vessels within the restricted group and cargo receivables, to fund capex commitments and improve its liquidity.

Investors expect Naviera Armas may not make a €3.19 million interest payment due under its 2024 senior secured notes on Nov. 15 after the Spanish ferry operator missed an Oct. 31 coupon payment on its 2023 senior secured notes. Naviera is in a 30-day grace period ending Dec. 1.

Under measures approved by the Spanish government to combat the Covid-19 pandemic, creditors cannot enforce against a company in default until Dec. 31, according to an official state bulletin. Struggling companies are able to delay filing for insolvency (concurso) until the year-end, but can do so if they prefer. Under the Covid-19 relief normative, creditors cannot file for a forceful insolvency (concurso necesario), which is an insolvency request on behalf of the company.

As reported, Naviera could follow the path taken by Spanish groups Lecta and Codere, this year, and use an English law scheme of arrangement to implement a restructuring of its debt. The English scheme process could be used to implement any number of refinancing options including: (i) a debt for equity swap, (ii) the amendment of note documentation, or (iii) a complete cut of creditors’ claims.

--Luca Rossi, Laura Vilaça