Deutsche Schiffsbank backs down on ship arrest

DEUTSCHE Schiffsbank has been forced to retreat after having the 40,170 gt bulker Umberto D’Amato arrested in Louisiana on Tuesday and promptly releasing the vessel on Wednesday when it discovered that its owner had not, in fact, broken the terms of its loan agreement.

The confusion arose apparently because of ties between Gorgonia di Navigazione, which owns the vessel and took out a $30.2m loan to finance its construction in 2006, and D’Amato di Navigazione, the prominent Neapolitan shipping company, which is being restructured after running into financial difficulties earlier this year.

The companies are linked. They also have the same address in Naples. And it was Michele D’Amato, the now ailing president of D’Amato di Navigazione, who acted as guarantor for the Gorgonia loan. But, a company spokesman insisted, Gorgonia is not part of the D’Amato group.

Vittorio Porzio, a lawyer representing both companies, said: “Gorgonia is an independent company and in good standing with respect to profitability. The bank appears to have misunderstood its position.”

Deutsche Schiffsbank declined to comment, but its US lawyer, Brian Wallace of Phelps Dunbar in New Orleans, confirmed that the vessel had been arrested and then released. He declined to specify the reason for the release.

Embarrassingly for the bank, however, and perhaps for D’Amato, its legal papers also included a wealth of financial detail that throws a light on D’Amato di Navigazione as it seeks to fight its way out of the shadow of bankruptcy.

In its court papers, the bank sought the immediate auction of the vessel, the proceeds to be used to repay the $28.7m in remaining principal, as well as accumulated interest, costs, and expenses on that 2006 loan, which was used to finance the construction of the Umberto D’Amato.

In justifying its action, however, the bank cited the financial plight not of Gorgonia but of “the D’Amato group of companies,” describing it as “seriously adverse to our position”.

The bank quoted a recent PricewaterhouseCoopers analysis of the company, which forecast its revenues would decline from $481m last year to $80m this year.

The PwC report added that D’Amato’s net debt had leapt from $62.1m at the end of 2007 to $174m at the end of the first quarter of 2009, and that company management expected a cashflow deficit of $77.3m for the last nine months of the year.

The bank also revealed that D’Amato’s representatives had threatened a bankruptcy filing in Italy if the creditors did not go along with the restructuring plan in its proposed form.

Mr Porzio declined substantive comment on the ongoing restructuring talks, saying only that “we are working on it calmly but it is a delicate process and must remain confidential for the moment.”

(Source: Lloyd’s List)