The parties have not been able to find an amicable solution to this disagreement, and the matter was referred to mediation pursuant to the terms of the LLC Agreement. Such mediation took place in December, without success.
Odfjell remains committed to resolving this matter constructively through negotiations, but to protect the company’s interest, Odfjell filed a complaint on December 23 for judicial relief with the courts of the State of Delaware.
Odfjell is a committed long-term owner of Odfjell Terminals US (OTUS), and our focus is to ensure stability, quality, and safety from both an operational and financial perspective, short and long term. OTUS is a very healthy business with sound leverage and a financing structure that leaves balance sheet capacity for further growth.
In recent years, Odfjell’s terminal platform has been growing successfully through accretive investments funded locally by the respective joint ventures. While Odfjell is ready and willing to invest additional capital into our terminal platform, it is fundamental that each joint venture has a balance sheet that provides strength and agility. This is a strategy that we firmly believe is in the interest of both the terminals and the shareholders.
As joint venture partners in OTUS, we have had a good working relationship since Northleaf acquired their ownership stake from Lindsay Goldberg in 2019. However, we have recently seen a shift in Northleaf’s approach that we believe is detrimental to the company’s long-term viability and financial status.
OTUS is facing a maturity on $193 million in debt, and Northleaf has refused to approve of a simple refinancing or “amend & extend.” Our lenders stand ready and willing to refinance our outstanding debt.
The dialogue between the principals on each side has always been—and is—good, but we believe that Northleaf’s suggested excessive leverage, only to fund an unsustainable dividend, would significantly weaken OTUS’ prospects.
Odfjell’s position has been to refinance the outstanding debt only, for OTUS to retain its stability and capacity for growth—alternatively, to extend the existing debt, allowing the shareholders to continue discussing alternatives.
When Northleaf refused to approve an amend & extend of current financing, and after having tried mediation, we saw no other option than to initiate legal proceedings to safeguard the company. Northleaf has responded with a countersuit.
Our lawsuit alleges that Northleaf is withholding its consent in violation of its duty of good faith and fair dealing as a joint venture partner because Northleaf wants Odfjell to buy out its joint venture interest at a premium and is seeking to impose excess leverage on the company to fund a dividend.
We are seeking an order from the Chancery Court requiring Northleaf to consent to an amend and extend refinancing; in the alternative, we are seeking appointment of a limited purpose custodian to provide a majority on the Board of Directors to approve an amend and extend of the company’s existing debt.
Northleaf is seeking an ordering dissolving the company because it claims the board is deadlocked over the question of declaring a dividend. We do not believe this relief is warranted, and we believe the Court will reject Northleaf’s application.
The dispute is at the shareholder level and will not have any consequences for OTUS’ employees, customers, or daily operations. OTUS’ performance and market position remain strong, and both shareholders are first and foremost concerned with preserving OTUS.
Odfjell is asking the Court to resolve the question of an amend and extend refinancing before the debt becomes due in March 2025.
“We are confident in our legal position and our ability to protect OTUS. OTUS has a bright future, and we remain focused on its continued growth and success.”
Adrian Lenning, Managing Director Terminals
