Some of the payments from insurers will be deployed in the share buyback, with Gulf Navigation intent on using current market weakness to make its play. (This image is used for illustrative purposes.) Image Credit: Supplied

Dubai: The UAE’s Gulf Navigation plans to buy back 10 per cent of its shares in a bid to shore up the stock price during a time of market ‘weakness’.

This move will enhance “investor confidence, which will lead to more stability and improve the market profitability for the stock in the future,” the company, which is listed on DFM, said. The stock is quoting at Dh0.35.

Gulf Navigation had net losses of Dh279 million, some improvement on losses of Dh327 million in 2019. It is now targetting a full-scale debt restructuring and refinancing deal this year.

An initial agreement has been reached with a majority of lenders on "new and flexible terms that will allow the company to adapt to current market conditions and achieve better growth".

Insurance payout helps

It was last year that one of the company’s vessels, the GL1, sunk off the Japan coast. “Despite recording losses of Dh279 million, due to the decrease in activities of livestock carriers as a result of losing the ship, the company was able to reach a final agreement with the insurance company to ensure the collection of insurance amounts arising from the loss,” it said. “The collected insurance amounts will contribute to enhancing the liquidity of the company, which in turn, will support operational activities.”

Some of these will be used to fund the share buyback, plus the “excess liquidity resulting from the debt refinancing process. Gulf Navigation will focus on taking advantage of all opportunities  to overcome the current global crisis. Management is also keen to continue aligning the company on the right path to achieve its ambitious goals for the coming years."

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Sukuk offer

The company – which also owns Greek shipping operator ENI – has launched proceedings for a mandatory convertible Islamic sukuk with a maximum value of up to $50 million. The details will be presented at the annual general assembly this month.

This issuance aims to convert part of the company's debt into shares, thus increasing the paid-up capital and reducing the ratio of accumulated losses to the capital.

The Greek deal
Gulf Navigation has an MoU with Greek company Empire Navigation Inc. to acquire a fleet of petrochemical and dry bulk carriers, which will contribute to its "ability to enter new markets and expand its client base locally and the GCC".

ENI owns 20 petrochemical vessels and 16 dry bulk ships.