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INTERVIEW-More bankruptcies to hit Norway maritime industry

Published 04/20/2009, 10:06 AM
Updated 04/20/2009, 10:32 AM
GOGL
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* Shipowners' lobby sees more industry bankruptcies

* Calls for postponement of back tax

By Aasa Christine Stoltz

OSLO, April 20 (Reuters) - The Norwegian shipowners' association expects more bankruptcies in the maritime industry as it prepares to fight the Norwegian government on a tax system it says will contribute to the sinking of shippers.

Norway, which controls around 5 percent of the world's merchant fleet, has been a major player in international shipping for more than 150 years and has built up a large maritime industry around traditional shipping operations.

The financial crisis has severely hurt the highly cyclical industry, and freight rates have plunged up to 90 percent in some segments, with the dry bulk segment hardest hit.

The shipowners' association said two yards had so far filed for bankruptcy -- Havyard Solstrand AS in October 2008 and Karmsund Maritime Service in March 2009.

Other shipping groups have run into financial difficulties, including dry bulker Golden Ocean, which raised $110 million in new equity and delayed and cancelled orders in April, though it now says the measures it took will create a solid financial base.

"This is a very demanding and serious situation," Chief Executive of the Shipowners' Association, Sturla Henriksen, told Reuters in an interview.

"We know this will be a very difficult time for many, and we know that not everyone will survive," he said.

Henriksen said the industry should be prepared for lay-offs and shutdowns "both at sea and on land".

TONNAGE TAX ROW

Norwegian shipping groups have clashed with the Labour-led government over a tonnage tax system presented in 2007 under which back taxes are being imposed on undistributed profits retained by companies over many years.

The plan was presented before the worst of the crisis was evident last year, as part of a system akin to the tonnage tax in European Union countries. Norway is not in the EU.

Numerous companies have called the new tax a betrayal of a 1996 deal, meant to keep them competitive under the Norwegian flag, and the first companies are now preparing to fight the government in the court with the association's assistance.

Norwegian groups have so far paid 2.8 billion crowns ($507 million) of a 14 billion crown bill, and the court cases seek to reverse the back tax in full, claiming it is illegal.

BW Gas Limited, which has been hit with a bill of 3.9 billion crowns, will take a case to court on June 3, at the same time as Farstad Shipping, according to BW Gas.

Ship management group Bergshav Tankers will be the first company to fight the case on May 18.

Henriksen said more court cases could be expected if the court's decision favour the shippers.

Henriksen said his association, regardless of the court's decision, was also calling for a postponement of the tax. At a time when profits are fading and credit from banks is tighter, the industry will suffer even more because of this, he said.

"What we are asking for, is that (the government) postpones further payments until the economic times have improved. If (the government) is firm in its position, it ought to know that this will have consequences for the shipowners involved," he said.

Maritime industry group Wilh. Wilhelmsen responded to the new plan by moving its shipping activities to Malta, while tanker group Frontline has already moved its headquarters to Bermuda to escape the Norwegian taxman.

Shares in Golden Ocean and BW Gas and Farstad Shipping lost 88 and 82 percent, respectively, in 2008. They have added 13 percent to 5.08 crowns and 94 percent to 20.80 crowns in 2009.

Shares in Farstad Shipping lost 56 percent in 2008 and have risen 47 percent in 2009 to 99.50 crowns. (Editing by Will Waterman)

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