Gulf Navigation Holding’s (GNH) ability to continue operations has been hampered badly and is in desperate need of financing after recording huge losses on higher provisions in 2013.

GNH losses jumped more than 5 times after it lost two arbitration cases in London last year, allocating hefty amounts for provisions.

The company said in its financial report that it defaulted on a $938,000 (Dh3.4 million) loan instalment, which was due in July 2013, and its directors are considering various ways to raise finance and that “its ability to continue as a going concern is reliant upon continued availability of external debt financing and additional liquidity”.

The company said that, on September 13 and October 4 last year, two of its vessels – Gulf Sheba and Gulf Eyadah – were arrested at the instructions of the lenders at the Port of Rotterdam and at the Port of Bahamas, respectively. The company had to sell the vessels on February 13, 2014, for Dh368 million, including the bunker inventory on the vessels.

The group, according to its statement, had Dh699.5 million liabilities at the end of December 31, 2013.

“The Group’s management are continuing their discussions with the lenders to restructure the repayment of the shortfall. If the Group is unable to agree the requirement restructuring of the remaining loan related to the vessels and in the absence of other financing alternatives, the Group would be dependent on market-based asset values to repay its borrowings.

“As a result, there exists a material uncertainty which may cast significant doubt on the ability of the Group to continue as a going concern such that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business,” the statement said, adding that the directors are also considering various options for raising finance to fund group’s working capital and future investment requirements.

Gulf Navigation said last week that it may have to take Dh229 million provisions from a case involving Chinese firms for building two VLCCs after arbitrators awarded decision against the UAE firm.

This is the second arbitration loss for Gulf Navigation in as many months.

On February 2, 2014, a UK tribunal decided against Gulf Navigation in another dispute involving Nordic American Tankers for delivery of vessel Gulf Scandiac.

According to its website, the company has currently 12 vessels in its fleet.

Losses mount

The company’s losses jumped to Dh927.67 million for the year ended on December 31, 2013, compared to Dh147.8 million in the previous year, an increase of Dh779.8 million or 527 per cent.

The company said in a statement to Dubai Financial Market that it took Dh832.13 million provisions for 2013, which is 89.7 per cent of total losses.

Losses arising out of these one-time non-recurring provisions include potentially – partially or completely – reversible provisions of Dh276.67 million, which are 29.8 per cent of the total losses of 2013.

The group had accumulated losses of Dh1.4 billion, which represent more than half of the share capital. Its assets plunged 35.4 per cent to Dh1.42 billion last year from Dh2.2 billion in the previous year.