Aries in doubt

Aries Maritime Transport says auditors have raised "substantial doubts" about the company's future for the second year in a row.

But the company says it is working on measures to address the auditors' concerns, including a recent deal with Grand Union and negotiations with banks.

"The company has incurred a net loss, has a net working capital deficit and has not met certain of its financial covenants of debt agreements with lenders," PricewaterhouseCoopers says in the company's annual report. "These conditions raise substantial doubt about its ability to continue as a going concern."

The Nasdaq-listed products tanker and containership owner's annual report cites $8.7m in losses in 2007 and $39.8m in 2008 among reasons for the "going concern" statement. PricewaterhouseCoopers also raised substantial concerns about Aries in its 2007 report.

In the last two years, the company was not in compliance of loan facility covenants, and lenders have the ability to demand repayment of its debt. The company is in negotiations to earn wavers on the covenants.

The company also says it finished 2008 with a working capital deficit of nearly $232, including $224m in debt that has been deemed current. Aries shifted the debt to a current status due to uncertainty over its ability to meet loan terms and uncertainty about whether lenders will call in the debt. (Read the full annual report here.)

Athens-based Aries says it is tackling the problems by, in addition to seeking covenant waivers, pursuing plans to improve the company's performance and financial strength.

"These plans mainly relate to the reduction of vessel operating expenses, the potential sales of one or more vessels to strengthen its financial position and the potential addition of assets which would enhance its future cash earnings," Aries says in the annual report.

A source close to the company says that like many shipowners, Aries needs to raise capital in its efforts to navigate the industry downturn, but companies with smaller floats do not have the flexibility to raise it in at-the-market public offerings.

Top Ships is poised to launch such a measure after auditors tagged its annual report with a "going concern" statement.

Figured into Aries' plans is the deal with Greece's Grand Union, which gives Aries three capesize bulkers worth $36m in exchange for nearly 16 million shares.

But so far Grand Union, led by Michael Zolotas and Nicholas Fistes, has only signed a non-binding letter of intent and Aries says there is no guarantee that a definitive agreement will be signed.

Aries has also sold its 1,799-teu boxship Ocean Hope (built 1989) for $2.3m.

The deal left the Jeff Parry-led company with nine products tankers and two containerships.