Rickmers Maritime Trust

[Zelphon]

Hi Guys,

This is another counter I am vested in..

Reason is mainly because of it's deep discount to NAV and low payout ratio at 14% now... (Part of the agreement for waiver of LTV)..

Yield will be stagnant for the next 3 years but yield at current price is abt 8%....

However, the cash hoard after 3 years due to withholding the payout will be substantial..

As such, I feel that this is a gem but need to hold 3 years or more with 8% returns..

What say u?

[Musicwhiz]

Hi Guys,

This is another counter I am vested in..

Reason is mainly because of it's deep discount to NAV and low payout ratio at 14% now... (Part of the agreement for waiver of LTV)..

Yield will be stagnant for the next 3 years but yield at current price is abt 8%....

However, the cash hoard after 3 years due to withholding the payout will be substantial..

As such, I feel that this is a gem but need to hold 3 years or more with 8% returns..

What say u?

I can only comment using the knowledge I gained from being an ex-shareholder of FSLT (First Ship Lease Trust).

From my view, risks MUST be mitigated to the extent that the Trust does not pay out more cash than it generates; and it should also protect itself from having its loans recalled due to breach of LTV covenants. While cash flows may be continuing due to reduction in payout ratio, one must ask if there is enough cash to eventually redeem all the loans, or if the loans are able to be rolled over?

I don't know much about Rickmers per se, but with the shipping industry still mired in uncertainty and with rates still low, my understanding is that a lot of the ships were purchased at much higher prices during boom times. Unless the Trust has the flexibility to pay for ships at distressed prices (and hence very high yields), it would mean the Trust would remain essentially stagnant and be unable to grow.

Any other number of risks could crop up in the interim which may destabilize the Trust, so one should look at it from more than one angle rather than just cash flows alone.

Just my 2-cents. Hope it helps....

[Nick]

Hello fellow investors,

Just a small update - Rickmers will be releasing their 3Q results on Friday (12 Nov).

Honestly, I do not expect fleet expansion to be carried out in the near future. Don't let the 'large cash hoard' fool you - there are still substantial debts out there that needs to repaid promptly to further reduce its LTV ratios in order to exit from the waiver program.

RMT revealed the loan repayment plan a few months ago. Let me summarize it here:

FY 2010: US$94.5 million
FY 2011: US$32.9 million
FY 2012: US$43.2 million
FY 2013: US$68.1 million

At the moment, RMT has US$768 million debt (excluding its convertible bonds) and US$131 million cash. It generates US$71 million cash-flow annually and pays out a distribution of US$9.8 million to unitholders. RMT may choose to repay in excess of the minimum principal repayment amount to further reduce leverage. There is an outstanding US$49 million convertible bond (to Polaris) as well. Hence much of their cash-flow will be diverted to loan payments. So it will be difficult to launch huge and meaningful acquisitions.

However, it is not all doom and gloom. I would expect significant book value growth over the next 3 years due to an exponential increase in retained earnings. The Trust is currently only paying out 13% of its cash-flow Growth in fleet capacity may come in the future if shipping banks do regain their confidence in the Trust. Near-term, RMT should aim to secure a higher yielding charter for its vessel leased to CSAV till March 2011. I believe it is plying at rates far below current market valuation.

Just want to stress that deleveraging (and not growth) will be theme for the next few quarters.

Cheers,
Nick

(Vested)
Disclaimer: Do your own research. Not a call to buy or sell.

[Nick]

Hello fellow unit-holders,

Q3 2010 results was released a few hours ago
http://info.sgx.com/webcoranncatth.nsf/V...90035552A/$file/Announcement_Financial_Statement_3_Qtr_2010_12_11_2010.pdf?openelement [Results announcement]

RMT's cash-flow remains stable with income available for distribution standing at US$18.3 million. The Trust has proposed a dividend payout amounting to US$2.4 million (US$0.0057/unit) to unit-holders which represent a 13% payout ratio. This represents a dividend yield of 7.6%. The remaining cash was retained as part of its de-leveraging plans.

This is an expected and 'boring' quarter with the exception of the implementation of the loan restructuring proposals approved in the previous EGM which consist primarily of -

1) Regular loan amortization over the next 10 years.
2) Payment of US$64 million cancellation fee to Polaris in the form of cash and convertible bond.
3) 3 year LTV waiver with higher interest rates.
4) DPU cap of US$0.0060 per quarter until the Trust exits the LTV waiver.

RMT booked a one time cancellation fee expense of US$64 million in 3Q for the proposed acquisition of 7 vessels. This was approved in the latest EGM. This fee compromised of a US$15 million payment and a US$49 million convertible bonds (strike price is S$0.48/unit) due by 2014. The convertible bonds are held by the parent company at the moment. This has led to a sharp drop in NAV to US$322 million.

The trust enacted its bank loan repayment plan by repaying US$86.4 million in 3Q 2010 and a further US$15 million cancellation fee to Polaris. The loan repayment schedule remains the same as previously stated. RMT has earmarked a further US$32.6 million to be repaid within the next 1 year.

At the moment, the Trust owes US$681 million worth of secured loans, carries US$49 million convertible bonds and has a cash hoard of US$46 million in the bank. It retains around US$15 million worth of cash per quarter. Essentially, this means that Rickmers is still highly geared with a secured debt to secured vessel ratio of 63.8% which is much higher than Pacific Shipping Trust ratio. The Trust will take time (at least 1-2 years) before it can resume its growth path as it needs to build up its equity while reducing its loans.

In short, there isn't much upside to RMT for the next 1-2 years. Its dividend payouts should remain stable barring a major double dip though its 5 counter-parties are blue chip companies may be a small source of comfort for unit-holders. Moreover, its small payout ratio may provide a source of buffer in the event of a drop in revenue.

(Vested)
Disclaimer: Not a call to buy or sell. This is a stock which is highly unlikely to go anywhere for the next few quarters. I may be wrong so do your own research.

[Zelphon]

Hi Guys,

This is another counter I am vested in..

Reason is mainly because of it's deep discount to NAV and low payout ratio at 14% now... (Part of the agreement for waiver of LTV)..

Yield will be stagnant for the next 3 years but yield at current price is abt 8%....

However, the cash hoard after 3 years due to withholding the payout will be substantial..

As such, I feel that this is a gem but need to hold 3 years or more with 8% returns..

What say u?

I can only comment using the knowledge I gained from being an ex-shareholder of FSLT (First Ship Lease Trust).

From my view, risks MUST be mitigated to the extent that the Trust does not pay out more cash than it generates; and it should also protect itself from having its loans recalled due to breach of LTV covenants. While cash flows may be continuing due to reduction in payout ratio, one must ask if there is enough cash to eventually redeem all the loans, or if the loans are able to be rolled over?

I don't know much about Rickmers per se, but with the shipping industry still mired in uncertainty and with rates still low, my understanding is that a lot of the ships were purchased at much higher prices during boom times. Unless the Trust has the flexibility to pay for ships at distressed prices (and hence very high yields), it would mean the Trust would remain essentially stagnant and be unable to grow.

Any other number of risks could crop up in the interim which may destabilize the Trust, so one should look at it from more than one angle rather than just cash flows alone.

Just my 2-cents. Hope it helps....

Hello fellow unit-holders,

Q3 2010 results was released a few hours ago
http://info.sgx.com/webcoranncatth.nsf/V...90035552A/$file/Announcement_Financial_Statement_3_Qtr_2010_12_11_2010.pdf?openelement [Results announcement]

RMT's cash-flow remains stable with income available for distribution standing at US$18.3 million. The Trust has proposed a dividend payout amounting to US$2.4 million (US$0.0057/unit) to unit-holders which represent a 13% payout ratio. This represents a dividend yield of 7.6%. The remaining cash was retained as part of its de-leveraging plans.

This is an expected and 'boring' quarter with the exception of the implementation of the loan restructuring proposals approved in the previous EGM which consist primarily of -

1) Regular loan amortization over the next 10 years.
2) Payment of US$64 million cancellation fee to Polaris in the form of cash and convertible bond.
3) 3 year LTV waiver with higher interest rates.
4) DPU cap of US$0.0060 per quarter until the Trust exits the LTV waiver.

RMT booked a one time cancellation fee expense of US$64 million in 3Q for the proposed acquisition of 7 vessels. This was approved in the latest EGM. This fee compromised of a US$15 million payment and a US$49 million convertible bonds (strike price is S$0.48/unit) due by 2014. The convertible bonds are held by the parent company at the moment. This has led to a sharp drop in NAV to US$322 million.

The trust enacted its bank loan repayment plan by repaying US$86.4 million in 3Q 2010 and a further US$15 million cancellation fee to Polaris. The loan repayment schedule remains the same as previously stated. RMT has earmarked a further US$32.6 million to be repaid within the next 1 year.

At the moment, the Trust owes US$681 million worth of secured loans, carries US$49 million convertible bonds and has a cash hoard of US$46 million in the bank. It retains around US$15 million worth of cash per quarter. Essentially, this means that Rickmers is still highly geared with a secured debt to secured vessel ratio of 63.8% which is much higher than Pacific Shipping Trust ratio. The Trust will take time (at least 1-2 years) before it can resume its growth path as it needs to build up its equity while reducing its loans.

In short, there isn't much upside to RMT for the next 1-2 years. Its dividend payouts should remain stable barring a major double dip though its 5 counter-parties are blue chip companies may be a small source of comfort for unit-holders. Moreover, its small payout ratio may provide a source of buffer in the event of a drop in revenue.

(Vested)
Disclaimer: Not a call to buy or sell. This is a stock which is highly unlikely to go anywhere for the next few quarters. I may be wrong so do your own research.

Yup... I agree this stock is unlikely to go anywhere...
But at least it is definitely not going to go down under and with about 8% annual dividends and potential upside after 3 yrs..

Why not?
I shall continue to hold this..

[Nick]

Hi Zelphon,

It is quite difficult to say 'upside after three years'.

The loan repayment schedule stretches to 2012. Its latest set of presentation slides includes the following information -

FY 2010: US$94.5 million
FY 2011: US$32.9 million
FY 2012: US$43.2 million
FY 2013: US$68.1 million
FY 2014 - 2021: US$531.8 million

This means that RMT will have to fork out US$66 million a year to clear the debt by 2021. Granted, that it is highly unlikely that the loans will be structured in a way to ensure full repayment by 2021 since the Trust would still have collateral assets. But even if we target a 2/3 payout structure, the Trust will have to fork out US$44 million a year. Not entirely a bad sum since RMT is able to generate US$71 million a year (with its current 15 long term charters and 1 T/C). Dividends can double and some cash can be retained but there isn't much room for M&A here. Hence, I personally feel that the only way for RMT is truly 'regain its upside' is to refinance its loans after paying a significant portion of it down and rebuilding its equity to the tune of at least US$400 million in order to be a little more attractive to the lending banks. Loan refinancing should include annual loan repayments and some room for its own cash retainment to fund opportunistic acquisitions.

Not too sure what their current VTL ratios are at the moment ?

Nick

[iff]

Currently this counter is priced at a big discount to NAV,
I've done some analysis too and I believe more upside for Rickmers in the next year or two.

The risk level is medium, and it would only make a small part of my investment.

[Nick]

After much thought, I have decided to fully liquidate my shareholdings in Rickmers Maritime Trust.

Disclaimer: Not a call to buy or sell.

[iff]

After much thought, I have decided to fully liquidate my shareholdings in Rickmers Maritime Trust.

Disclaimer: Not a call to buy or sell.

Hi Nick, does your "fully liquidate" means cashing out from this investment?

[Nick]

After much thought, I have decided to fully liquidate my shareholdings in Rickmers Maritime Trust.

Disclaimer: Not a call to buy or sell.

Hi Nick, does your "fully liquidate" means cashing out from this investment?

Yes...I sold everything. I bought this Trust very recently - a few days after the EGM approval for its re-structuring. I have come to realize that my original investment premise was flawed and hence I decided to sell the Trust.