Freshly Minted – October 28, 1999

HIGH YIELD

GOLDEN OCEAN

A week of activity brings the company closer to reorganization. In Japan Kawasaki and Hitachi announce the “postponement” of eight vessels – including the seven notorious option vessels – with moneys to be applied against upcoming deliveries, which were ordered with money raised through the initial Bond offering. The savings on the next vessels could be as much as $16 to $20 million each, making the vessels competitively priced in today’s market. To put things in perspective, World Wide Shipping recently placed an order for 2 VLCCs at Daewoo at $70 million each. Just 16 months earlier the company placed an order for 2 similar ships at Daewoo for circa $80 million apiece. Patience pays. At the same time, Stena Bulk have come out with a ringing endorsement of the Golden Ocean World Trader class vessel, whose design flexibility permits it to trade equally effectively into Japan’s draught restricted ports as well as the rest of the world without any cargo carrying capacity loss. Finally in New York efforts are underway to finalize the financing on the next three deliveries – one to Shell and two to Stena Bulk. The process requires bondholder waiver in order to meet indenture covenants. We understand that the waiver solicitation deadline has been extended from today until Tuesday, November 2nd.

PEGASUS

No less busy a week, Pegasus saw its bonds downgraded by S&P to triple C minus, primarily basis the reported Blystad settlement terms and a technical loan to value covenant negotiation with Chase London. But management has overcome concerns about vetting clearance by oil majors and while the sector is brutally competitive vetting approval is vital.

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