Pacific Basin expects $198 million in asset impairments

Hong Kong-based dry bulk shipping company Pacific Basin revealed a one-off non-cash impairment charge of $198 million on the group’s Handysize core fleet.

The impairment charge relates to primarily its smaller and older Handysize vessels and will be reflected in its unaudited consolidated results for the first half of 2020.

Including this impairment, Pacific Basin expected to record a net loss in the range of $212 million to $227 million as compared to the $8 million net profit recorded for the H1 of 2019.

However, the group is expected to record positive EBITDA for the period in the range of $75-90 million as compared to $101 million for the same period of 2019.

Pacific Basin said the impairment resulted from the need to review the carrying value of its fleet amid the uncertain market outlook.

The dry bulk shipping market has been facing demand challenges as a result of the COVID-19 pandemic. The demand contraction comes on the back of an already challenged dry bulk market since early 2019.

This weakness in demand has coincided with continued dry bulk fleet growth and limited scrapping during 2019 and the first half of 2020.

“The expected impairment will not impact the operations or operating cashflows of the group, which will continue to benefit from a robust balance sheet,” Pacific Basin said.

“As at 30 June 2020, the estimated cash balances and borrowings of the group are approximately $316 million and $1,021 million respectively and the net borrowings ratio is approximately 41% against the net book value of owned vessels taking into account the expected impairment.”

Pacific Basin said it has recently secured $63.6 million in new long-term credit facilities secured against five of its previously unmortgaged vessels, of which $33.5 million was undrawn as of June 30, 2020.