Nynas AB has applied for an extension of the company reorganisation for another three months. The reorganisation process will continue while the Södertörn’s District Court is considering the decision, which is expected to be announced next week.
On 13 December 2019 Nynas filed for company reorganisation at the District Court. Nynas loans were not extended by the banks and due debts could not be paid, forcing Nynas to apply for a reorganisation.
Important steps forward have been taken in the reorganisation process, but in a complex business such as Nynas it was expected that an extension of the time beyond the initial three months would likely be necessary.
The application contains information about the progress in the ongoing reorganisation, changes in shareholder structure, as well as information about Nynas’ financing situation.
A key element for a successful reorganisation is to take Nynas out of the impact of U.S. sanctions, which requires the majority owner, Venezuela’s state-owned oil company PDVSA, to reduce its ownership interest in the company. Nynas shareholders have agreed on changes in the ownership structure which have been presented to the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC). OFAC has now responded that the proposed changes are satisfactory and has also stated that when the proposal is executed, OFAC is ready to swiftly initiate its internal process for the removal of sanctions applicable to Nynas and prepare an appropriate public statement to that effect. Nynas estimates that it will take a few weeks to implement the measures and actions required to satisfy OFAC’s demands. Nynas is working intensely to carry these out as soon as possible.
Financing solutions being negotiated
Nynas’ financial results during the first quarter is normally negative due to the seasonal nature of the bitumen business, which is profitable mainly in the second and third quarters. Nynas’ loss in January-February 2020, which is much larger than normal, mainly stems from costs not related to operations but outside management’s control due to sanctions and the reorganisation, such as financial costs, oil price losses and foreign exchange losses.
Nynas has enough funds to cover operating costs during the reorganisation, but lacks the funds to make all planned and necessary purchases of crude oil to maintain production volumes going forward. For this purpose, intensive negotiations are progressing with some of its largest customers for an agreement on financing for deliveries of a total of SEK500–600 million (USD52-63 million). In addition, Nynas’ supporting financial advisor Carnegie Investment Bank is negotiating a short-term financing for the remaining SEK400–500 million (USD42-52 million) from another lender.