Full price collapse of Russian lender Havila Kystruten – E24

With Russian capital behind it, shipowner Per Sævik and coastal route Havila challenged Hurtigruten’s dominance along the Norwegian coast.

The construction of the company’s four new cruise ships, priced at over NOK 4 billion, is being financed by Russian state-owned charter giant GTLK, through its subsidiaries GTLK Europe and GTLK Asia.

The Russian invasion of Ukraine and subsequent sanctions from Western countries have now caused major turmoil for Ireland-based GTLK Europe, which has raised €3 billion from investors in the European bond market.

The money is used to buy planes and ships, which are in turn leased to commercial tour operators such as Havila Kystruten, under long-term contracts.

When the Russian invasion began in the early hours of Thursday, the value of many GTLK bonds in Europe plummeted by more than 50 percent in the hours that followed.

Some are now trading at only 33-35 percent of face value.

At such rates, a high probability of default is indicated, Thomas Larsen, an analyst at Pareto Asset Management, tells E24.

He asserts that he is speaking in general.

He wasn’t expecting war

– We have no reason to worry, says Per Sævik, the largest owner of the Havila Coastal Road via the Havila Holding family, to E24.

He notes that the Havela Coastal Road has agreements with Ireland and Hong Kong-based GTLK subsidiaries, not Russia.

– Investors who speculate on the collapse of GTLK Europe seem to disagree with this assessment?

– Of course we are in a tragic situation with the war between Russia and Ukraine, which, of course, has a certain effect. But what we are dealing with is that the development does not affect our contracting parties. Then we’ll see what the future holds, says Sævik.

– To what extent have you assessed the risks of obtaining financing by a Russian state-controlled actor?

– We did not expect to have a position with the war between Russia and Ukraine. But now we have a situation where this has come true, says Sævik, and we have to deal with it.

The Havela coastal road is close to 11 percent on the Oslo Stock Exchange on Friday, and thus has fallen more than 22 percent since the peak price of NOK 25.8 per share on January 20.

Ireland supports sanctions

GTLK is one of the world’s largest aircraft leasing companies. At the end of 2020, the portfolio of 70 passenger aircraft and 19 carriers was worth $4.5 billion. The list of clients includes airlines such as Emirates Airlines, easyJet, SunExpress and Aeroflot.

The latter is owned by the Russian state. On Thursday afternoon, it was announced that the UK would exclude Aeroflot and other Russian airlines from British airspace, and US media are speculating that the same will happen in the US.

Ireland, which is the base for a large share of the international rental industry, has announced that it will support any EU sanctions against Russian companies operating on the island.

According to Politico, Ireland is home to more than 100 Russian shell companies that are used to funnel large sums of money into “shadow banking.”

Ireland is militarily neutral, but this conflict is by no means neutral. The Irish government will fully support any further sanctions against Russia, Deputy Prime Minister Leo Varadkar said in the Irish National Assembly on Thursday.

He drew particular attention to banking and aviation, and that the Irish financial world is an “important source of financing for the Russian economy.”

“We know that Russia’s inner circle and Putin have significant fortunes abroad,” Varadkar continued, noting an estimate that £118 billion of Russian capital funneled through Dublin to Russia between 2005 and 2017.

Too late

The four Havila Kystruten vessels were ordered after the Havila Group was awarded a ten-year contract in 2018 with the state to operate four of the 11 coastal routes between Bergen and Kirkenes.

after Extensive delays The first ship, the Havela Capella, was commissioned just before the New Year.

At the beginning of February, the company announced that the first sailing with the second ship, the Havela Castor, would be delayed again from April 7 to May 10.

While GTLK Asia is the counterparty to the first two ships, GTLK Europe will finance the last two ships.

According to the agreement, Havila Kystruten will pay GTLK an annual charter fee of 5.6-5.7 million euros per vessel. Of a total construction cost of just over NOK 1 billion per vessel, GTLK offers loans close to NOK 870 million.

E24 asked Havila Kystruten how any sanctions against GTLK or related companies would affect its ability to continue funding the Norwegian shipping company’s construction programme.

“We expect our rental partner to stick to the agreements made and relate to any penalties to be introduced,” Martini says.

GTLK Europe did not respond to an E24 inquiry.