Rickmers Maritime bites the dust; manager opts to liquidate

Singapore

CONTAINER shipping trust Rickmers Maritime on Wednesday threw in the towel after a months-long stalemate in negotiating for a lifeline that is conditional on a successful restructuring of S$100 million of medium-term notes due in May.

The trustee-manager cited aggravated illiquidity and lack of investors as supporting its decision to wind up the trust, though it also highlighted "advanced discussions" with "a potential buyer for the trust's assets".

The trustee-manager qualified that "no deal has been finalised at this stage" though this deal on the table "may allow the trust to distribute cash recoveries upfront to unsecured creditors".

Rickmers Maritime would thus far emerge as the first listed shipping trust to file for winding up here.

Robson Lee, partner at law firm Gibson Dunn, explained that unlike the case for a Singapore-incorporated company, a registered business trust cannot apply to undergo judicial management (JM).

As a court-supervised process, JM grants companies extra time over a winding-up or liquidation scenario for rehabilitation or the orderly sale of assets.

This option is not on the table for Rickmers Maritime.

Mr Lee also noted the manager of the shipping trust clearly stated that "it has been unsuccessful in getting any white-knight investors" to pump in new equity to rehabilitate the trust.

The disclosure suggested the trustee-manager faced "insurmountable challenges in obtaining the required consensus among the syndicate lenders, noteholders and other creditors for significant debt-write-offs" that will justify new equity injections.

The only exit path for the shipping trust appears to be liquidation even though observers noted that with extra time, its trustee-manager may get a better deal from selling the trust's assets.

The Business Times understands the talks held with this unidentified buyer are for a deal encompassing the entire Rickmers Maritime's fleet of Panamax-sized container ships.

Only five vessels on the trust's fleet are generating positive cash flows from term-charters with Japan's Mitsui OSK Lines (MOL). Proceeds from these charters go towards repaying a bank loan from a BNP-led syndicate.

Last September, a proposal was first floated for the senior lenders - HSH Nordbank and DBS included - behind the trust's largest outstanding bank loan, to extend US$260.2 million to refinance and push out the maturity of the bulk of the trust's senior debts.

The refinancing package, which covers the bank loans from two separate HSH-led and BNP-led syndicates, was also intended to unlock the cash flows from the five MOL-chartered ships.

But the trust failed to get holders of the S$100 million medium term notes to agree to a pre-condition for the refinancing: a substantial debt-to-equity swap proposed for the outstanding notes.

Among other things, noteholders have questioned whether senior lenders holding collaterals on non-performing assets are benefiting at the expense of unsecured debt-holders.

The trust subsequently defaulted on a S$4.3 million coupon payment to noteholders in November 2016 and the US$196.7 million principal repayment to the HSH syndicate due on March 31 2017.

BT understands DBS underwrote 17-18 per cent of the HSH-led syndicated bank loan, but Singapore's largest local bank would not confirm or comment on its exposure. A spokeswoman however, said: "Rickmers Maritime is an existing NPL (non-performing-loan) case and suitable provisions have been made."

Of the potential realised proceeds from the sale of the trust's assets, OCBC credit analyst Nick Wong emphasized that "secured claims must be met first before the unsecured".

So if "unitholders are highly unlikely to recover any of their investments" as the trustee-manager stated in Wednesday's SGX filing "noteholders could potentially bear losses", Mr Wong said.

The trustee-manager has already won approval from unitholders to liquidate the trust at an extraordinary general meeting last October. Unitholders then extended the greenlight for the trust to be wound up if it cannot be successfully restructured or where the trustee-manager deem it as impracticable or inadvisable to continue the trust.

The trustee-manager said the trust will not proceed with the annual general meeting scheduled on Apr 26 2017 now that it is filing for a winding up.

The trust will also be applying to the Singapore Exchange for its delisting from the Singapore bourse.

Units in Rickmers Maritime last changed hands at S$0.026 before trading was suspended.