First Ship Lease Trust

wonghw12 · 27-11-2018, 08:28 AM

Announcement is out for a 3 for 2 (more than 1 for 1!) rights issue. Shocking how dilutive the rights are, and even more so as the use of proceeds (on fleet renewal?) doesn't really seem necessary. Crucially also, we are missing details on the exact fleet that FSL is looking to acquire.

Anyone looking to keep the shares and subscribe for the rights issue will need to put a lot of faith in the new management. My instinct would be to bail immediately.

**CY09** · (This post was last modified: 27-11-2018, 09:20 AM by CY09.)

I do agree that doing fleet renewal is not good way of spending. I rather they spent it on debt reduction

Personally i would prefer the company to just muddle through with the current fleet and close itself down with the last fleet. Will be voting against the proposal on the EGM

ghchua · (This post was last modified: 27-11-2018, 09:54 AM by ghchua.)

(27-11-2018, 08:28 AM)wonghw12 Wrote: Announcement is out for a 3 for 2 (more than 1 for 1!) rights issue. Shocking how dilutive the rights are, and even more so as the use of proceeds (on fleet renewal?) doesn't really seem necessary. Crucially also, we are missing details on the exact fleet that FSL is looking to acquire.

Anyone looking to keep the shares and subscribe for the rights issue will need to put a lot of faith in the new management. My instinct would be to bail immediately.

The market had reacted very badly to this deeply discounted, dilutive, non-underwritten and non-renounceable preferential offer. Please take note that this is a preferential offer, not a rights issue.

Questions that unitholders of this business trust should ask:

1. If the proceeds is meant for fleet renewal, why isn't this preferential offer underwritten? Since they have said that there is no minimum amount that must be raised from this preferential offer, save for the undertaking of the controlling shareholder, I wonder how many ships they can buy with no underwritting.

2. If the discount from this share issue is so deep at around 31.8% from the last traded price and it is so dilutive at 3 for 2 (more than double the current share issue), why is it not structured as a renounceable rights issue instead? In this way, unitholders who do not wish to take up the share issue can sell their nil-paid rights entitlements in the market. Currently, unitholders would have to sell their units in the market to raise funds for the preferential offer as they will be diluted if they don't take up the offer.

All in all, it seems to me that this fund raising exercise has been badly structured.

MOV · 27-11-2018, 10:45 AM

With no distributions since 2013 and now issuing such a dilutive rights which is non-renounceable, no wonder market is extremely displeased..

From 3Q results presentation, the fleet profile is between 10 years old to 14 years old and the two oldest product tankers with maturing lease by 2020 are Cumbrian Fisher (14 yrs old) and Clyde Fisher (13 yrs old). Seems like the management decision is for fleet renewal is to replace these ageing vessels.. rather than sell/liquidate them to pay down debt.

What is the manager's compensation based on? Fleet size, performance or fixed salary?

A lot of faith is needed indeed...

WaterTree · 27-11-2018, 11:42 AM

(27-11-2018, 09:16 AM)CY09 Wrote: I do agree that doing fleet renewal is not good way of spending. I rather they spent it on debt reduction

Personally i would prefer the company to just muddle through with the current fleet and close itself down with the last fleet. Will be voting against the proposal on the EGM

As a shareholder, I feel like being rob in this rights issue. If they close itself down, I believe shareholders will see much more value instead of putting more money into the trust. After finally seeing some light at the end of tunnel, we are seeing more pain instead. I will be voting against the proposal too.

**weijian** · 27-11-2018, 12:48 PM

hi CY09,
IIRC, much earlier in this thread, we kinda like concluded that it is in Mgt's best interest to continue to draw a Mgt fee rather than liquidate it.

hi ghchua,
I do find it perplexing that it is non-underwritten and non-renounceable. Do you think it is because the underwriting is going to be really expensive since they are raising money not from a position of strength?

**CY09** · 27-11-2018, 01:46 PM

Hi weijian,

It was more like agreeing that the trust can muddle through and collecting fees. However from this announcement, the trust is raising money for fleet expansion/renewal. It increases their AUM and possibly mgmt fee. Furthermore, this corporate action don't seem to benefit current unitholders.

It is also worth noting there was a change in trustee mgr in April

ghchua · 27-11-2018, 02:18 PM

(27-11-2018, 12:48 PM)weijian Wrote: hi ghchua,
I do find it perplexing that it is non-underwritten and non-renounceable. Do you think it is because the underwriting is going to be really expensive since they are raising money not from a position of strength?

Possible. But underwriting allows certainty on the amount of funds to be raised. Since the objective is to renew their fleet, isn't it better to have a fixed amount available?

They could also undertake the whole preferential offer and take up all the excess shares out there.

wonghw12 · 27-11-2018, 04:56 PM

Any guesses what fleet and from where the management would buy, especially given the uncertain amount to be raised? I am more cynical naturally but would like to hear other's views.

Gaudente · (This post was last modified: 29-11-2018, 09:09 AM by weijian.)

3rd quarter report stated a NAV of 0.37 S$ per unit and the new units offer price is 0.043 .... I'm speechless (and ripped off big time Sad

)
I think I'm done with Singapore.

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