UPDATE 1-Debt-laden shipping firm Torm strikes deal with banks
* Banks offer $100 mln new working capital facility
* Extend maturities for $1.8 bln debt to December 2016
* Torm sees positive cash flow even at current rate levels
* Says current shareholders retain 10 pct
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COPENHAGEN, Oct 2 (Reuters) - Debt-laden Danish shipping group Torm A/S has struck a long-awaited deal with its banks that will see them take a majority stake in the firm in exchange for extending $1.8 billion of debt and giving it access to fresh funds.
The tanker and dry-bulk firm has been fighting for survival in a sector slump now in its fourth year, caused by a weak global economy, oversupply of vessels and low freight rates.
"It has taken extraordinarily long time to reach this agreement and inflicted very high costs on the company," said Chairman of the Board N. E. Nielsen in a statement.
"Torm will now be able to continue its business even in a continued difficult market," he added.
Under the deal, Torm's $1.8 billion of debt will be extended until the end of 2016, loan repayments will be deferred and it will have access to a $100 million working capital facility available until Sept. 30, 2014.
In exchange, Torm's banks will be granted a 72.7 percent stake in the business, while time charter partners will get a 17.3 percent stake. Existing shareholders will retain 10 percent of the business.
Torm has been in talks with its 14 banks for months, trying to secure a comprehensive financing solution.
Its pretax losses grew to $132.1 million in the second quarter, from $23.7 million in the same period last year. .
Torm said it expected to be cash flow positive even at the current low freight rate levels, but forecasts a loss before tax of $350-380 million for the full financial year.
The figure excluded accounting effects from the execution of the restructuring, further vessel sales and potential impairment charges.
Torm's shares were up 32.5 percent at 3.63 Danish crowns at 0715 GMT against a 0.1 percent fall in the Copenhagen stock exchange's benchmark index .
(Reporting by Mette Fraende; Editing by Mark Potter)
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Keywords: TORM BANKS/