Rickmers Maritime Trust

[CY09]

I dont think OPMI will be that goondu to take up another tranche of rights. Furthermore, how much more money can it raise? Another 1 for 1 right issue pricing at a discount will only yield about 40mil. It is not enough to even cover 25% of its debts. And with the lucrative 5 MOL charters expiring in 2018, i am of the view at least one of the syndicates will pull the plug. MOL contribution is 60% of Rickmer's revenue and cashflow; despite only taking up 5 of rickmers 16 ships. The current MOL charter is at 26.8k per day when market rate is at 5.2k per day

Rickmer's has to hope that charter rates double by 2018 from its present value to sustain this year revenue. Not possible when YZJ has so much orders for containerships.

[weijian]

I dont think OPMI will be that goondu to take up another tranche of rights. Furthermore, how much more money can it raise? Another 1 for 1 right issue pricing at a discount will only yield about 40mil. It is not enough to even cover 25% of its debts. And with the lucrative 5 MOL charters expiring in 2018, i am of the view at least one of the syndicates will pull the plug. MOL contribution is 60% of Rickmer's revenue and cashflow; despite only taking up 5 of rickmers 16 ships. The current MOL charter is at 26.8k per day when market rate is at 5.2k per day

Rickmer's has to hope that charter rates double by 2018 from its present value to sustain this year revenue. Not possible when YZJ has so much orders for containerships.

A (sufficiently) rational OPMI will not sink more good $ after bad. But alas, my real life observation is that most of us are not rational (enough) and have various degrees of blind spots. Any inevitable (as you have pointed out) rights issue will gets its target audience, ie. those whom are suffering a large degree from loss aversion.

But do agree that without a dividend, it is not easy to pull the trick. It might have to resume a small dividend to lay that trap first.

http://singaporeanstocksinvestor.blogspo...ights.html

[CY09]

Thanks Weijian for ASSI's link.

Reading the comments, I feel for them. The likely valuation of Rickmer's equity is zero, according to my valuation. It must have sucked a lot of money from shareholders who fell into the 2013 rights issue trap.

[Greenrookie]

It never rains but pours? Hanjin forms 6.5% of revenue.

http://www.hellenicshippingnews.com/hanj...eivership/

[Behappyalways]

Rickmers Maritime seeks restructuring of $345m in debt as industry woes mount
http://www.hellenicshippingnews.com/rick...oes-mount/

[money]

Depreciation is a genuine expense.

For companies like First Ship Lease & Rickmers Maritime, their managers have never set aside any funds for buying new ships. They are now desperately setting aside funds to pay down debt. In 10-20 years time, after they have paid down all the debt, the ships would be too old and have to be scrapped. The share price drops to near zero as there is no more cash generating ships.

Well before that day arrives, the operating managers from the above 2 trusts will once again raise $$ via rights from naive shareholders.

Perhaps, we can put things into perspective. buffett has never done a rights issue through berkshire hathaway. Our shipping managers will eventually have to raise rights to replace ships that have reached their lifespan, this could have been avoided if they set aside $$ for buying new ships and they cant do that because they are busy shrinking their leveraged balance sheet.

I would urge all current shareholders to dump their shares in these 2 companies. Off my head, K-Green should generate more real yield than these 2 shipping companies in the long run.

*not invested in FSL, RM or K-green

Took 4 years before Rickmers is brought down to its kness. However, FSLT will most likely survive. Now, notes holders for RM will have to take up to a 60% haircut, shareholders are left with pathetic shares that will easily pay no dividend after restructuring. Try discounting its dividend cashflow for the next 10 years, i think RM is close to worthless for shareholders now.

[CY09]

Reason why it took 4 years is because Rickmers raised 100mil+ from its rights which it has been using to pay interest on its debts

Now that the big tide of principal repayment has come, Rickmers has ran out of cash. IMO, bondholders are unlikely to agree to an exchange. This is because post 2018, the lucrative MOL contracts are over. MOL now contributes 60.1% of revenue and a renewal of contract to US$5000 rates means a 50% reduction in revenue. And this is before including Hanjiin's effect on its revenue. Unless its bondholders have the bank's interest in their mind (or get some deals from the banks), Rickmers will be wound up.

In the case of a winding up, its vessels do not have much value. From FSLT recent disposal of 2 container ships (4229 TEU) for USD$10.80 mil, we can "agar" Rickmers fleet of 16 veseels are worth about 83 mil USD or 113 mil SGD. Rickermers fleet is about the same TEU as FSLT 2 container disposal.

From this, it means the creditors debt of 300 mil cannot be even covered by the liquidation of all of rickmers fleet and cash. Hence zero value on equity.

Rickmers can only survive if 1) Bondholders agree to preference shares with a low interest of say 3-4% and banks agree to extend the loan maturity to a longer duration and of a lower interest. That is throwing $$$ to protect your soured investments.

[brattzz]

maybe DBS will be keen to roll-over Rickmers,
wat's another 1B to them anyway?

*punt intented*

[specuvestor]

It is quite amazing after so many years that Rickmers' parent, which is well known in the industry, blinked. In 2009 AGM they were still saying they had strong backing from the parent but refused to answer what is the asset of the parent which is unlisted.

Guess it should have been expected cause the parent's bond maturing 2018 was trading par a year ago declining from Dec 2015 to now less than 20cts

[CY09]

Come to think of it.

Estimated value of current Rickmers fleet + cash = approx US$150 mil (SGD 200mil).

Debt in order to seniority
1) Bank Loan - USD 281.4mil (s$383 mil)
2) Bond Holders (unsecured) - s$100 mil

Seen in this light, I think my view has changed; it is better for bondholders to roll over their debts. This is because earning the interest is better than letting the company fall, where it is almost impossible to secure a valuation of above s$360 mil for its 16 ships when current rates are at $5,110 per day. However, they must fight that they are always ranked second to banks and not be demoted to perpetual securities/preference shares, who may be surpassed by other debtors.

As for shareholders reading this post, It is almost impossible to get anything (unlike China Fishery's bankruptcy saga where the rejected bidders bid for its Peru Ops was more than CF stated liabilities)