Struggling Dutch shipbuilder Royal IHC has succeeded in getting the court to sign off on its financial restructuring plan. The plan allows IHC to sell its successful subsidiary IQIP to HAL Investments to improve its balance sheet.

Royal IHC has been in financial difficulty for several years now. In April 2020, the shipyard had to be rescued from bankruptcy by the Dutch government, banks and a group of companies, including HAL, with bridging loans and credit guarantees amounting to hundreds of millions of euros.

This was followed by a major restructuring in November 2020. This resulted in 300 jobs being cut in the Netherlands, 300 abroad and 500 among the contingent workforce. In addition, several activities and business units were divested, such as engineering companies Vuyk and KCI, IHC Hitech, and the company’s tunnelling business. Its participation in Rotterdam Offshore Group was also divested.

At the beginning of October another restructuring round was announced due to a lack of new large shipbuilding and ship repair orders. IHC points to the consequences of the Covid crisis and geopolitical developments as having exacerbated its problems. ‘Both have had a major impact on the markets for our products and has also led to high volatility in the commodity market and suppliers,’ states IHC.

Also read: Another net loss for Royal IHC, 2023 will be a crucial year

Court ratification

In January, IHC announced it had reached an outline agreement with banks, the government and HAL. But not all financiers were on board with the plans.

Stakeholders around Royal IHC as well as a majority of Royal IHC’s current bankers agreed to the proposed simplification of financing some time ago. A minority of banks prevented the required unanimity of votes. To convince all lenders of this plan, Royal IHC initiated WHOA proceedings (Homologation Private Agreement Act), supported by the majority of lenders. This private agreement was ratified (homologated) by the court today (9 March).

Also read: Second IHC rescue close to finalisation

Selling IQIP

The plan revolves around selling IQIP to HAL. This will pay off the existing credit and guarantee lines with the existing bank consortium to be repaid largely in advance.

In addition, with the remainder of the proceeds from the sale of IQIP, Royal IHC will have access to significant liquidity and a strong balance sheet with good solvency. The plan also provides for the continuation of existing guarantee lines from the bank consortium to enable new contracts to be entered into for building vessels and equipment in the markets in which Royal IHC operates.

The aim remains to play an important role in the Dutch shipbuilding industry and economy and as an international player with a specific focus on the dredging, offshore, mining and defence industries. All indications point to improving demand in the markets in which the company operates, IHC says in a statement.

IHC: ‘Royal IHC is very grateful to the Dutch Government and, by extension, to Atradius for their role in bringing the parties closer together. Royal IHC would also like to explicitly thank all other financial stakeholders who have agreed to this financial restructuring plan for their role in this process. We also wish to express our respect for the defence of parties who initially did not fully agree with the restructuring plan. We express our hope and expectation that with the homologation of the agreement, a new situation will emerge in which we jointly work towards a healthy future for Royal IHC.’

Also read: HAL may be willing to rescue IHC again by buying IQIP

Market potential

With the sale of IQIP, IHC loses one of its crown jewels. However, the shipbuilder says that even after the sale of IQIP, it will have sufficient market potential with a strong flow business consisting of orders for smaller standard vessels and equipment. In addition, the company says it is well positioned to meet the increasing demand in Royal IHC’s core markets (Dredging, Offshore Energy, Mining and Defence). Therefore, with a significantly strengthened balance sheet, Royal IHC expects to be able to once again obtain the necessary project financing to start winning the more complex contracts.

Picture by M.M. Minderhoud