US investor rights law firm, Bernstein Litowitz Berger & Grossmann (BLB&G), is currently investigating potential violations of the US federal securities laws by Höegh LNG Partners.
BLB&G said that its investigation is focused on whether Höegh misled investors about the adequacy of its capital and finances.
On 27th July, 2021, after the US market closed, Höegh announced that it had slashed its quarterly common unit distribution by 98% in order to preserve cash to address near-term refinancing issues.
Specifically, Höegh disclosed the collapse of the company's refinancing plans for its FSRU facility off the coast of Indonesia, after the charterer of the vessel challenged Höegh's new credit facility and the charter agreement.
The charterer announced its intent to commence arbitration to terminate the charter and/or seek damages from the company. Höegh also said that its parent company, Höegh LNG Holdings, will no longer provide financial support to HLP.
As a result, Höegh's stock price fell by $11.57 per share, or around 65%.
The investigation is being led by BLB&G partners Avi Josefson and Scott Foglietta.
Finance not agreed
HLP confirmed that the refinancing of the ‘PGN FSRU Lampung’ credit facility, which had been scheduled to close by the end of the second quarter of 2021, was not completed.
This was due to the alleged failure by the charterer to consent to and countersign certain documents related to the new credit facility, Höegh claimed.
In a letter dated 13th July, 2021, the charterer raised certain issues regarding the vessel’s operations. In another letter dated 27th July, 2021, it was stated that the charterer will commence arbitration to declare the charter null and void, and/or to terminate the charter, and/or seek damages, HLP said.
Höegh said that it had started discussions with key lenders, and expected that the terms of any alternative refinancing, if successful, are likely to be less favourable than the terms of the originally agreed refinancing.
John Veech, HLP Board Chairman, said: "The Board of Directors has determined that it is in the best interests of the Partnership moving forward to focus its capital allocation on deleveraging its balance sheet, strengthening its long-term financial sustainability, and enhancing its ability to operate the business within its internally generated cash flows.
“First, the Partnership needs to prioritise resolving the issues related to the ongoing refinancing of the ‘PGN FSRU Lampung’ credit facility. With that near-term priority addressed, and by adjusting our capital allocation to conserve internally generated cash flows from our timecharters, we are confident that we can reduce our debt levels, strengthen our balance sheet, and operate on a more sustainable basis in the context of an evolving FSRU market," he stressed.
