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I think a lot of people just saw the mess of Rickmers and think the management must be lousy. I suggest you to read the history about of Rickmers.
In the very beginning, Rickmers adopts the same strategy as PST, with the vessels of Rickmers were much younger than PST. at IPO, Rickmers had a contracted fleets of 10 vessels valued around US$ 700 mil and secured debt 360 mil, which in terms of shipping trust is not a bad leverage ratio. Then there comes the acquisition which makes Rickmers almost go under. the acquisition of 5 MOL ships and 4 Hanjin ships are all using debt. But, the management did signal that they will do an equity funding to raise 100 mil for the top-up facility and another 150 mil for partial repayment of debt for 5 MOL vessels and 4 Hanjin vessels. if all succeeded, the leverage of Rickmers should be still around equity:debt = 50 : 50 coupled with cash retained from operation. As for the 4 giant Maersk vessels, the management did mention that the delivery was still quite far away and they thought they could get a better financing deal later. If everything worked like they hoped, Rickmers would be doing fine just like PST.
The problems came as the sub-prime crisis unwinded. the credit was freezed. Rickmers could not do a successful equity raising because its unit price was too low (orignal expection was US$ 0.8). Rickmers couldn't draw down more loan because the vessel value fell.
I would not blame the whole mess for poor management, but poor luck(sub-prime, credit crunch) and lack of foresight.
For the future, I hope the management learnt the lesson and execute their strategy better next time of couse with better luck. Still, an equity raising exercise is unavoidable simply because the equity is too little to sustain its asset size. They probably will do it right after they reinstate the distribution. I guess the amount of the equity raising should be around US$100 mil. with 2 US cents/quarter distribution, I hope the unit price can rise to a level above 0.5 (20% yield? I hope $1, 10% yield), they can repay their convertible loan instead of conversion.
In the further future, there will be another round of equity raising exercise coupled with more acquisition. Don't oppose equity fund raising. just treat it as another IPO. And it is essentially the only way reits or trust can grow faster. Grow with retained profit for trust/reits is quite pathetic. Rickmers need certain asset size to really sustain a long way. just like reits, large cap reits can survive longer than smaller reits. and large cap companies can survive longer than small cap companies.
I have to add that I took a great risk to invest in Rickmers. So do your own research.
I want to further emphasis on the scheduled repayment. the amount is not random. it was written in the loans. That's why I said earlier, Rickmers does have a strategy to repay debt and grow with retained profit.
for the 360 mil facility, US$ 6 mil/ quarter starting from 2012 till maturity and with the remaining of bullet payment.
for the 288 mil facility for 5 MOL vessels, 72 mil should be repaid within 5 years after vessel delivered. the remaining 216 mil is divided into 5 tranches, US$ 1.2 mil/quarter (US$1.5 for the first installment) for every tranche for 20+ quarters and with the remaining of bullet payment.
for the remaining debt for 1st Hanjin Vessel, $862,500/quarter for the life of the loan and with the remaining of bullet payment.
from the above figures, it is obvious that the loan repayment is enough to cover its depreciation
In the very beginning, Rickmers adopts the same strategy as PST, with the vessels of Rickmers were much younger than PST. at IPO, Rickmers had a contracted fleets of 10 vessels valued around US$ 700 mil and secured debt 360 mil, which in terms of shipping trust is not a bad leverage ratio. Then there comes the acquisition which makes Rickmers almost go under. the acquisition of 5 MOL ships and 4 Hanjin ships are all using debt. But, the management did signal that they will do an equity funding to raise 100 mil for the top-up facility and another 150 mil for partial repayment of debt for 5 MOL vessels and 4 Hanjin vessels. if all succeeded, the leverage of Rickmers should be still around equity:debt = 50 : 50 coupled with cash retained from operation. As for the 4 giant Maersk vessels, the management did mention that the delivery was still quite far away and they thought they could get a better financing deal later. If everything worked like they hoped, Rickmers would be doing fine just like PST.
The problems came as the sub-prime crisis unwinded. the credit was freezed. Rickmers could not do a successful equity raising because its unit price was too low (orignal expection was US$ 0.8). Rickmers couldn't draw down more loan because the vessel value fell.
I would not blame the whole mess for poor management, but poor luck(sub-prime, credit crunch) and lack of foresight.
For the future, I hope the management learnt the lesson and execute their strategy better next time of couse with better luck. Still, an equity raising exercise is unavoidable simply because the equity is too little to sustain its asset size. They probably will do it right after they reinstate the distribution. I guess the amount of the equity raising should be around US$100 mil. with 2 US cents/quarter distribution, I hope the unit price can rise to a level above 0.5 (20% yield? I hope $1, 10% yield), they can repay their convertible loan instead of conversion.
In the further future, there will be another round of equity raising exercise coupled with more acquisition. Don't oppose equity fund raising. just treat it as another IPO. And it is essentially the only way reits or trust can grow faster. Grow with retained profit for trust/reits is quite pathetic. Rickmers need certain asset size to really sustain a long way. just like reits, large cap reits can survive longer than smaller reits. and large cap companies can survive longer than small cap companies.
I have to add that I took a great risk to invest in Rickmers. So do your own research.
I want to further emphasis on the scheduled repayment. the amount is not random. it was written in the loans. That's why I said earlier, Rickmers does have a strategy to repay debt and grow with retained profit.
for the 360 mil facility, US$ 6 mil/ quarter starting from 2012 till maturity and with the remaining of bullet payment.
for the 288 mil facility for 5 MOL vessels, 72 mil should be repaid within 5 years after vessel delivered. the remaining 216 mil is divided into 5 tranches, US$ 1.2 mil/quarter (US$1.5 for the first installment) for every tranche for 20+ quarters and with the remaining of bullet payment.
for the remaining debt for 1st Hanjin Vessel, $862,500/quarter for the life of the loan and with the remaining of bullet payment.
from the above figures, it is obvious that the loan repayment is enough to cover its depreciation