Indonesia-based Berlian Laju Tanker (B66.SG), one of the world's largest chemical tanker operators, will cease payments on its debts after breaching a loan facility covenant, as it falls victim to the perfect storm engulfing the shipping industry.

Berlian Laju, which owns a fleet of 67 chemical tankers plus other oil and gas vessels, estimates that around $418 million in principal debt payments are due to be made this financial year. In a statement to the Singapore Exchange, it said weak freight rates, high bunker costs and other operating costs had "significantly impacted" its business and financial position.

The statement said a covenant breach has been declared under a loan facility of a subsidiary, to which the company is a guarantor.

"Further, certain of the company's other subsidiaries have also failed to make payments that are due under certain lease facilities," it said, adding that it will temporarily cease repayments on bank loans and bonds and payments on ship leases and on similar obligations.

Operators across the shipping industry have seen freight rates grind lower to unprofitable levels in recent quarters. The global economic slowdown has affected demand while a glut of vessels coming onto the market has also increased capacity. This, combined with stubbornly high fuel prices, has resulted in losses for major shipping firms.

Singapore-listed container shipper Neptune Orient Lines Ltd. has reported three consecutive quarters of losses and has warned that it expects to have remained in the red for the whole of 2011. For the three months ended Sept. 30 it was in the red to the tune of $91 million as it struggled with falling rates and higher fuel costs. Its full-year results are due mid-February.

Berlian Laju Tanker has appointed FTI Consulting to carry out a financial assessment of the company and potential debt restructuring. After the market closed Friday, it requested that its shares be suspended in Singapore from Monday. Its shares had already been suspended on the Indonesia Stock Exchange Wednesday.

As of September the company had assets totaling around $3 billion and interest bearing net debt of around $1.67 billion. For the July-September quarter, the company posted revenue of $163.3 million.

The company said it is committed to carrying on with its normal business and operations and that it would give the highest priority to servicing its obligations to its suppliers and trade creditors.

According to Berlian Laju's latest financial report from November last year, a number of European banks had credit exposures to the company.

One of the company's subsidiaries in February 2011 obtained a loan with a maximum credit of $685 million from DNB ASA (DNB.OS), BNP Paribas S.A. (BNP.FR), ING Bank N.V., NIBC Bank Ltd, Nordea Bank Finland Plc (NDA.SK) and Standard Charted Bank PLC(SCZ.ZM), while SEB AB (SEB-A.SK) in May 2011 joined the group of lenders, according to the report.

Norway's DNB has an exposure to Berlian Laju, press spokesman Thomas Midteide confirmed to Dow Jones Newswires Friday, but declined to comment on the size or to provide any further detail.

Despite the headwinds affecting parts of the shipping industry, DNB's shipping portfolio is generally solid, Midteide said.

Nordea and SEB Friday declined to comment on any individual credit exposures. The other banks weren't immediately able to comment on the matter.

-By Matthew Allen, Dow Jones Newswires; +65 64154 158; matthew.allen@dowjones.com

(Edhi Pranasidhi in Jakarta, Gaurav Raghuvanshi in Singapore and Gustav Sandstrom in Stockholm contributed to this article.)