Rickmers Maritime Trust

why throw good money after bad ones? :O

http://infopub.sgx.com/FileOpen/RM_Annou...eID=422108

Rickmers is proposing of swapping s$60mil of the principal amount for bondholders to shares which will enlarge the share base by 150%

Quite a good deal by rickmers to bondholders. The only problem is how much will it depress share prices? If i were a bondholder turn equity owner, I will sell it instantly on SGX when I get it.

I am interested to see it being approved and how depressed will prices fall. It is going to be a good case study

Interesting proposals.

Let's do a game theory exercise, in the event that the restructuring fails, liquidation occurs and bondholders probably get nothing. Therefore rejecting even the alternate proposal becomes a dominated option for bondholders.

Knowing this, why would the unit holders vote to dilute themselves any more than necessary at the EGM?

Rickmers just wanna drag it out.... bondholders kicking the bucket down the street.... see who blink first?

For shareholders, they are stuck too

Vote down the equity dilution; Rickmers kaputs, they get zero.

Vote for equity dilution; they live another day, hopefully getting something back.

Its going to be a very long shipping cycle downturn if everyone follows this route.

(23-09-2016, 10:05 PM)CY09 Wrote: For shareholders, they are stuck too

Vote down the equity dilution; Rickmers kaputs, they get zero.

Vote for equity dilution; they live another day, hopefully getting something back.

Its going to be a very long shipping cycle downturn if everyone follows this route.

From what i see, if the unit holders vote no to the dilution, the trustee will have to issue new units under the current mandate which will offer only 16.67% of the expanded trust units to the noteholders. 

The noteholders will still get $40 million nominal in notes together with 16.67% of the equity so they should vote yes even to the alternate proposal and avoid liquidation.

Given that the MTN holders are likely to receive units of Rickmers Trust, shouldn't they borrow shares to hedge their position

If the latest restructuring deal go through, the hedge will allow one to locked in the price ahead of the rest, assuming that most will want to sell upon receiving the units

If it fails, the hedge will allow one to record gains in the short to set off losses of owning the MTN

Any thoughts?

In theory yes. In practice it's not so simplistic pay-off diagram

Most people don't lend out shares in a distressed company as they need speedy flexibility to sell in case something happens. So in such structure sometimes the IB have to get major shareholders to agree to lend out shares

If say the company bankrupt and suspend. You might not reap the full benefit cause the settlement price for you to buy back your shorts OTC may not be zero. And if you don't settle you might have to pay the borrowing cost as long as the case drags. You might not have the bargaining power you thought you have

Shorts sound sexy but it's not so simple. That's why sometimes bonds rise on default or stock rise on chapter 11 as covering happens.

Latest update. Professionals, and businessmen are common within bondholders...

Singapore millionaire, 77, joins bondholders uniting in workouts

SINGAPORE (Oct 4): Jerry Tan, a 77-year-old retired Singaporean businessman, was among dozens of bondholders in the city who joined forces last week to submit their demands as more companies seek to restructure debt payments.

“The only way to put ourselves in a position of some strength is to come together as a group,” said Tan, who said he owns more than $8 million of notes. “The whole bond market is really bad and you can expect a lot more defaults. The authorities should step up to protect investors and Singapore’s reputation as a major financial centre.”
...
http://www.theedgemarkets.com.sg/sg/arti...g-workouts

Multi-Millionaire blaming gov not protecting him on unrated bond ?