Gulf Navigation to issue Dh125m sukuk to shore up its finances

Proceeds from the sukuk will be used to settle overdue liabilities and to meet capital expenditure requirements

Provided photo Gulf Navigation chemical tanker 

Courtesy Gulf Navigation  *** Local Caption ***  bz15fe-gulfnav.jpg

Gulf Navigation, a Dubai transport and shipping company, plans to issue a Dh125 million sukuk through a private placement to improve its finances.

The company received approval from shareholders at its general assembly for the Islamic bond, Gulf Navigation told the Dubai Financial Market, where its shares trade.

The proceeds from the five-year non-convertible sukuk will be used for various purposes, including the settlement of dues to suppliers, payment of overdue salaries, advance payments to preserve contractual obligations and to meet capital expenditure requirements, among others.

“The offer to issue the sukuk will be limited to qualified investors only. However, some of the targeted qualified investors may already be current shareholders of the company,” Gulf Navigation said.

The company reported a loss of Dh324.9m for 2019, up from Dh40m during the previous year as operating costs increased and the carrying value of some of its vessels was written down.

Operating costs rose 34 per cent year on year to Dh171.8m and the company made a provision of Dh178.2m against the value of its vessels.

Operating revenue, however, increased 13 per cent to Dh166m.

Gulf Navigation is working to have all of its vessels utilised in a manner that improves profitability and reduces accumulated losses, the company said recently. Accumulated losses stood at Dh445.2m at the end of 2019.

“The recent decline in oil prices will reduce the bunker cost on certain vessels, where the cost is borne by the group, and is expected to lead to higher profitability,” the company said.

Gulf Navigation is headquartered in Dubai, with branch offices or warehouses at ports in Fujairah, Khorfakkan and Abu Dhabi, as well as an overseas office in Saudi Arabia, according to its website.

It owns and operates a fleet of chemical tankers, livestock transport vessels and offshore support vessels, as well as providing marine and ship repair services.

Global long-term sovereign sukuk issuance is expected to rise 6 per cent to $75 billion (Dh275.4bn) in 2020 as governments look to raise more money to meet financing requirements in the wake of lower oil prices and the coronavirus outbreak, Moody’s Investors Service said in a recent report.