Since Tankships Investment Holdings Inc. (TNKS) was formed, its principal source of funds has been equity. Stockholders provided the equity through equity offerings, operating cash flows, and long-term borrowings. These funds have been treated as capital expenditures to establish, grow, and maintain vessels and fund working capital requirements and principal repayments on outstanding loan facilities.
Cash and cash equivalents
As of September 30, 2014, Tankships had cash and cash equivalents of $0.5 million—a decrease of $2.9 million, or 85.3%, compared to $3.4 million as of December 31, 2013. The decrease was mainly due to loan repayments and payments of financing fees of $21.7 million. It was also due to the decrease in invested equity by $11.8 million. However, it was partly offset by net cash provided by operating activities. The net cash amounted to $30.6 million.
Current liabilities exceeded its current assets by $245.6 million—compared to a working capital deficit of $242.4 million as of December 31, 2013. The working capital deficit increased by $3.2 million for the nine-month period ending on September 30, 2014. This is primarily due to the decrease in the trade account receivables and amounts due from related parties.
Meanwhile, restricted cash remained consistent with December 31, 2013, levels at $17.1 million. Restricted cash includes funds deposited in retention accounts for the payment of loan installments and minimum liquidity requirements under the loan facilities. Tankships believes that with this cash structure it will be able to satisfy its liquidity needs for the next 12 months. It will satisfy its liquidity needs with the cash generated from operations. If necessary, it will use proceeds from future debt incurrence or equity issuances.
Total liabilities and indebtedness
As of September 30, 2014, Tankships had total indebtedness of $277.5 million, net of deferred finance fees. This was a decrease of 6.9% from $298 million as of December 31, 2013—mainly due to the loan principal payments. The company classified its bank loans amounting to $282.3 million as current liabilities. It reported a working capital deficit of $245.6 million as of September 30, 2014.
Tankships’ cash-to-liabilities ratio was 0.16%. Other companies in the industry (SEA)—like Teekay Tankers (TNK), DHT Holdings (DHT), Frontline Ltd. (FRO), and Tsakos Energy Navigation Ltd. (TNP)—had cash-to-liabilities ratios at 0.57%, 0.65%, 9.01%, and 15.9%, respectively.