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UAE’s FAL Oil to hire restructuring officer for debt talks

UAE banks and top lenders

New CRO to be appointed in a week; Creditors divided on injecting new money –banker; FAL Oil awaits court judgement on claims against SEWA

August 13, 2012 10:45 by

Middle East trader FAL Oil, in talks with creditors on $700 million in debt, is on the cusp of hiring a chief restructuring officer to keep the faltering discussions on track, sources familiar with the matter said on Sunday.

United Arab Emirates-based FAL, once one of the biggest regional fuel oil traders, has been forced to cut its fuel oil and bunkering operations in the UAE by as much as 60 percent and shut its trading operations in Singapore and London.

“FAL is in the process of hiring a CRO, which could be finalized in a week’s time,” said a source close to the matter, speaking on condition of anonymity.

“Everyone’s interests are aligned – the company’s, the banks’. There are different levels of support from banks depending on their exposure, and the only option now is the restructuring.”

The company declined to comment.

FAL previously presented a medium-term plan to its creditors that included a standstill agreement for its existing $700 million in debt and a request for $620 million in fresh funds to keep business operations going.

Last month, sources told Reuters banks were likely to reject the restructuring plan..

“There has been no explicit yes or no from banks,” the source close to the matter said.

The Al Sari group, which owns FAL, is also putting in its fair share of new money as it seeks to prevent the year-long restructuring process from being derailed, the source added.

“Some creditors don’t want to put in new money, but we are trying to get them to agree,” a banker involved in the talks said, adding discussions had been delayed due to the traditional regional summer lull and the holy month of Ramadan.

FAL’s creditors include Standard Chartered Bank which heads the creditor steering committee, and HSBC.

UAE creditors are Emirates NBD, Commercial Bank of Dubai, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Union National Bank and First Gulf Bank.

Standard Chartered has a lien on a FAL-owned ship containing fuel oil worth $120 million, which traders and Asian media reports said had gone missing last month.

“The ship and oil is secured. We know where it is,” the banker said.

Standard Chartered declined to comment on specific details but said it continued to work with FAL and lenders to find the best solution for both the debt talks and the ship.

FAL’s troubles came into the spotlight last year after a payment dispute with the Sharjah government. In a rare move, FAL filed a court claim against the emirate’s state-owned utility SEWA for $750 million in unpaid fuel bills after private talks failed to settle the matter. A resolution is expected soon, the source close to the matter said on Sunday.

Consultancy Ernst & Young is slated to submit next month a court-requested report on the dispute, a third source said.

The utility declined to comment.

FAL Oil, which has closed its office in Singapore and halved staff in London, continues its operations on a much reduced scale.

Washington sanctioned the independent energy trader earlier this year for its role in supplying gasoline into Iran.

“We think the sanctions will drop automatically in January, as the company has not broken any laws or done any transactions with Iranian firms,” the source said.

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