(23-03-2013, 10:21 PM)freedom Wrote: supposedly, they should have around notional value of US$300+ million(out of original US$640 million) interest rate swap matured at the end of 2012. pay attention to the line item(derivative financial instruments) in their upcoming annual report.
Will the expiry imply a significant decline in interest cash expense ? Thanks.
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24-03-2013, 12:23 AM (This post was last modified: 24-03-2013, 12:32 AM by freedom.)
(23-03-2013, 11:34 PM)Nick Wrote:
(23-03-2013, 10:21 PM)freedom Wrote: supposedly, they should have around notional value of US$300+ million(out of original US$640 million) interest rate swap matured at the end of 2012. pay attention to the line item(derivative financial instruments) in their upcoming annual report.
Will the expiry imply a significant decline in interest cash expense ? Thanks.
it should. pre-crisis, the average interest rate was 5 - 6%, with libor now below 0.5%(for less than 6 months) and plus the 1.75% above libor, interest expense will drop quite significantly.
I would expect the management to swap the variable interest rate again to fix interest rate with more interest rate swaps maturing, as its charter income is still fix rate.
assuming the success of the right issue, after repaying the debt, with the interest expense savings, it would not be difficult for the trust to maintain its 0.6 quarterly dividend. It should be able to support its debt repayment schedule(around 50 million annually).
Still, there are significant risks involved, such as obsoletion of its fleets(pre-crisis, 4000 TEU was the mainstream and now, the much larger one are the mainstream) and much lower charter rate after its charter contract expiry.
To me, it is more a leveraged bet on container shipping.
A recent article from the New York Times about the shipping industry.
===
Can a ship float and be underwater at the same time? If it has been financed by a European bank, the answer may be yes.
A glut of ships, and slack demand for shipping in the weak global economy, have reduced the value of cargo ships. According to some estimates, as many as half the cargo carriers on the high seas today may no longer be worth as much as the debt they carry — putting them underwater, in financial jargon.
“By any kind of measure, this is a deeper and more difficult downturn than we’ve had in the last decade or two,” said Mr. Tsevdos of CR Investment.
Except for some specialized categories of ship, like liquid-natural-gas carriers, he said, “I don’t think there is a lot of indication for a lot of sectors that rates are going to turn around soon.”
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(23-04-2013, 08:08 PM)tangoraven Wrote: Rickmers just posted their Jan-Mar quarter results, how do the Gurus here feel they performed?
they had a set of presentation slides which was quite clear:
(Pg 15)
Peak charter rates during '04 > USD 45k
Average Rickmers charter rate = 25k
Current rates = 5-10k
(Pg 16)
Average remaining charter period = 2.9 yrs
unless one is highly optimistic of global trade growth leading to demand accelerating to the oversupply currently, charter rates for future leases that they manage to garner should be 20-50% lower than current ones. (and assuming all the banks don't call them in...)
unfortunately, i think it is the wrong industry at the wrong point of its cycle.
23-04-2013, 10:42 PM (This post was last modified: 23-04-2013, 10:56 PM by tangoraven.)
Thanks, sounds like its difficult to put in pin on whether subscribing and applying for excess rights would be a good idea... I got drawn into this since Mosi described it on his blog.
Back to the drawing board I guess...
Pardon my newbness, the Rickmers rights issue is not underwritten right? Only RG, CG and some IDs have committed to subscribe for about 40% of the rights units.
So, if the rights issue tanks and the unit price drops below 24 cents, everybody else will just let their rights lapse, RMT might end up getting only $40m only right?
If that is the case, not sure though, I'm surprised that they didn't try to go for a more guaranteed issue such as 2 rights per unit at a steeper discount, just to guarantee getting the $100m in the bank...
look at their finance reports and presentation carefully, you will understand why 40 million is enough. Anything more is good, but not necessary.
the 40 million is necessary, as they can't generate enough cash for its debt repayment schedule. 100 million is nice to have, but 40 million should be enough(together with its current cash balance).
Rights issue was well supported! Im confident Rickmers will emerge as the shipping trust of choice among yield hungry investors looking to invest in the shipping sector
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