The Estonian shipping company Tallink is involved in a serious debt spiral.
At the end of August the company had debts at interest of EUR 1.2 billion and capital of its own of just EUR 643 million. At the end of the accounting period Tallink’s cash reserves were a mere EUR 50 million.
The company’s gearing ratio (loan capital divided by capital employed) was 176 per cent. Presently a company’s solidity is understood to be weak if the gearing ratio is more than a hundred per cent.
The getting into debt started when Tallink began to expand its business. Three years ago the company bought its competitor Silja Line for EUR 470 million.
The bulk of the purchase price was covered by borrowed capital. Another purchase, namely that of the Superfast Ferries firm, cost the Estonians a further EUR 310 million. Tallink has also had hotels built, the financing costs of which have taken the lion’s share of the company’s free cash flow.
The Finnish daily Turun Sanomat reported in its Tuesday issue that Tallink has agreed with its 15 financing banks on postponing the repayment of the debts.
Tallink has agreed to pay back EUR 60 million of its debt within the next two years. This is half of what was stipulated in the original loan terms.
According to the agreement with the banks, the shipping company will pay instalments only during the first and the fourth quarter of its financial period. This is when the ships have the most passengers.
