First Ship Lease Trust

[yeokiwi]

I think Navios will not settle for a non-controlling stake.
I think the terms will only improve if there is another competing proposal. Given the money on the table, I suppose it is not impossible for it to happen.
Looking at how Rickmers' liquidation goes, I suppose Navios deemed it as a risk to leave FSL till the date of default and risk someone else picking up the money.

[wonghw12]

I think Navios will not settle for a non-controlling stake.
I think the terms will only improve if there is another competing proposal. Given the money on the table, I suppose it is not impossible for it to happen.
Looking at how Rickmers' liquidation goes, I suppose Navios deemed it as a risk to leave FSL till the date of default and risk someone else picking up the money.

Not sure if shareholders of FSL should be compelled to accept any proposal, as there's likely to be significant value upon liquidation. The last reported VTL is more than 125%. Shareholders should opt for liquidation if there's more value in doing so rather than getting diluted to keep FSL a going concern.

Comparatively, Rickmers had been in breach of VTL for a number of years, it was clearly in a negative equity position such that there's option value to Rickmers shareholders to keep it running or get 0 otherwise.

[CY09]

The rickmers wounding up shows how valuation is useless when a company is distressed.

Rickmers fleet was sold for US$112mil. For FY16, the trust delivered US$37.6mil of cashflow (71% came from the MOL contract). Netting off the MOL contract's remaining value of US$42.5mil (present valued at a discount rate of 10%), the fleet can be adjudged to have been sold at a price of US$69.5 mil with a cash flow generation ability of US$10.9 mil annually. Very very worth it.

Of course the more pertinent question is whether Rickmer's fleet of 15 ships is worth US$69.5mil? Guess what US$69.5 million is actually about the same price Rickmers will get if it sold off its container ships to the scrap yard (before commission). FSL got back US$9.5mil for scrapping its two 4,250 TEU containership after commission.

It is probably the worst valuation to use - scrap value of a vessel*. And if banks do use scrap value to value ships, even trusts like FSL will probably fail their revised valuation. Why not use market comparison approach of ships then (as Boon had linked market comparable through allied report?) The answer is that it won't fetch as good as market value in a fire sale. Also, i tried to do a market comparison approach for FSL and i found that their LTV would be about 160%.

It is really down to banks in how they decide to value FSL's fleet in the new refinancing terms. If banks do decide to work with vulture funds, the end result may be the banks deciding to value FSL's fleet at scrap value to force the trust to be wound up.

*scrap value assumes the ships can no longer be used for shipping journey and is sold as scrap metal

[wonghw12]

I don't think it is fair to compare Rickmers to FSL this way. The secondary market were already trading Panamaxes at low prices back then. Vesselvalues indicated 100% demolition rates for 10 year Panamax, so it wasn't surprising that Rickmers fetched such rates. The cashflow was also misleading as it included the high charter rates that were previously contracted. As an indication that Rickmers was in negative equity, its VTL had been below 1 for several years.

FSL has a VTL over 1.25. This is likely assessed and derived by independent shipbrokers. It need not be a firesale if the vessels are sold before the maturity of the loan. Boon provided good info on the values of certain tankers, but unfortunately we do not have good info on the values of all the tankers.

[Boon]

Navios is willing to pay USD 40 m for 50.1% stake of the ENLARGED units of the Trust. 
In so doing, Navios is paying “premium” to Nordbank's stake (the Sponsor/TM) and paying “discount” to non-controlling unit holders stakes.
In other words, TM’s gain (premium) is at the expense of non-controlling unitholders loss (dilution).
The higher price the TM gets for its controlling stake, the higher is the dilution on units of non-controlling unitholders
By subjecting unitholders to such a deal, TM is effectively putting its interest above that of unitholders, IMO.

Bank debt (USD)
FY2016 = 223 m
1Q2017 = 223 m – 20 m (voluntary repayment in 1Q2017) – 10.7 m (quarterly repayment for 1Q2017) = 192 m
3Q2017 = 192 m – 2 x 10.7 m = 171 m 
How about raising USD 20 m CONvertible LOAN from existing NON- controlling unitholders to further reduce debt to 151 m in September, if necessary.
Surely there must be lenders willing to lent USD 151 m against 22 vessels ( ~ USD 6.9 m per vessel).
If not, raise another USD 20 m => borrow only USD 131 m........................
It appears to me that the current TM is prioritizing and maximizing its interests above anybody else…………………
How would the TM feel if its units get diluted from the conversion of non-controlling unit holders loans………….HA-HA!
_______________________________________________________________________________________________________________________________

[yeokiwi]

Need to repeat a Sabana Shari'ah REIT here?
Media, internet, EGM etc except SIAS.

And is there any shipping tycoon, besides Navios, is interested to take on the majority stake from TM?
Unlike REITs, there are plenty of choices in the maritime industry to take on the TM role.haha.

The money is on the table. No one is interested??

[CY09]

There are, most of them are eyeing the asset but want it on a cheap by speaking to the secured lenders of allowing a default

[HitandRun]

By subjecting unitholders to such a deal, TM is effectively putting its interest above that of unitholders, IMO.

I wonder how SIC will rule on this. I was hoping that they will either not approve the whitewash waiver or at least ask for a 75% approval level. Would they be smart enough to see through the fog? 

CY09

A rights issue will be the last on TM's list because FSL Holdings got no money to pony up and will lose controlling power..... And why can't they sell the ships? Because then Navios won't pay them USD20 million (plus all the premium to be paid for the asset management company)... I suspect the USD20million is for them to retain all the ships AND to  CONvince  er I mean, persuade the non controlling unit holders to subsidise Navios.

[Behappyalways]

(Higher rates higher ship values???)

Shipping lines increase their rates in May

china-box-congestion-spreads
http://splash247.com/china-box-congestion-spreads/

[wonghw12]

The applicable margin over US$ 3-month LIBOR was 3.0%. This implies that the VTL is between 100% to 140%...

The 3 renewed tankers also only had the contracts renewed for only 2 years.