Frontline throws a chill over Norwegian funds

The world’s biggest oil shipping firm Frontline has fallen close to 30% on the Oslo stock exchange this morning on the threat it may break lending convenants within a month, creating big problems for funds benchmarked against the OBX index.

The Bermuda-based shipping company is run by Norway’s richest man John Fredriksen, but the company shocked analysts with its latest quarterly results, which showed a loss of $-136m against a consensus expectation of $-19m.

Dagens Næringsliv quoted Fredriksen’s colleague Tor Olav Trøim telling an analyst presentation that “the bottom has fallen out of the market”. Frontline is facing a squeeze because the value of its tankers has been falling at the same time as delivery rates. In the past two years daily rates for the biggest supertankers have swung anywhere between $0 to $250,000. The company needs to inject new capital, but that implies existing shareholders would be hit by a rights issue or other solution.

Shares were down over 28% as of midday local time on 22 November, according to data from the Oslo stock exchange. Although small relative to the index’ giant Statoil, it raises the prospect that the company could be dropped when it is next scheduled for a review, which is the third Friday in December.

The OBX, which constitutes the 25 most traded securities in Norway, is down about 15% year-to-date.







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