Noteholders issue direct demand to Rickmers Maritime

Singapore

THE trustee-manager of Rickmers Maritime Trust is expected to receive on Monday a "notice of acceleration" from a noteholder group demanding immediate payment of their share of the S$100 million medium-term notes (MTN) being proposed for restructuring.

The noteholder group, understood to hold over 40 per cent of the MTN, authorised its appointed legal firm Rajah & Tann to serve the notice.

This is a follow-up from the first notice served in September to the notes' trustee, DB International Trust. Rickmers Maritime said on Sept 28 that it "has not received" the first notice from the notes' trustee.

Selected noteholders in the group told The Business Times after a meeting last Saturday that they were not convinced the MTN restructuring proposal is equitable and transparent.

Rickmers Maritime last Friday threw in a cash handout of S$500,000 in all to noteholders as a sweetener for its second proposal. The shipping trust is seeking its unitholders' approval to issue 1.32 billion new units as partial redemption of S$60 million of the principal amount of the notes. This will bring down the outstanding notes to S$40 million, but on revised terms and repayable in November 2023 instead of May 2017.

The trust updated the proposal after noteholders rejected its previous offer to exchange the S$100 million notes for new unsecured S$28 million fixed-rate step-up perpetuals. The perpetuals will be convertible at any time to units of the trust at a fixed conversion price.

The proposed note restructuring is a precondition set by Rickmers Maritime's bank lenders for pushing out a large part of the trust's loans to the first quarter of 2021.

Noteholders who spoke to BT argued for the shipping trust to come clean on the haircuts tabled for all the company stakeholders; specifically, they are after the finer details of the deal made with bank lenders led by HSH Nordbank.

A noteholder who wished to be known as F Ngiam viewed the proposal as inequitable compared to others from "companies with similar situations that at most kick the can two years down the road". Mr Ngiam, who bought S$750,000 of the notes, pointed out that note restructuring exercises undertaken by other listed offshore-and-marine (O&M) players pledged full redemption in exchange for extension of the notes' deadlines. He noted that, in contrast, the shipping trust is asking its noteholders to "take a seven-year hike filled with a lot of uncertainty".

Fellow noteholders also asked for Rickmers Maritime to disclose the business plan for the extra years sought. One concern is the contracted fee with the trust's affiliate, Rickmers Ship Management. Just a few months ago, a unitholder pointed out that the trust had posted a 2 per cent hike in first-quarter vessel operating expenses to US$9.74 million. This was fuelled by, among other things, an increase in the vessel management fee paid to Rickmers Ship Management.

Others said agreeing to the revised proposal on inequitable terms would compromise noteholders' rights in their future negotiations with issuers.

"I do not want units in exchange for the notes; I want cash," said noteholder Jeffrey Sia.

Noteholders fear the risk of a massive dilution of their investments held in Rickmers Maritime. "What do you think will happen to the unit price after the issuance of the 1.32 billion units?" Mr Sia asked.

Some noteholders said they were prepared to fight for their rights even if it came with the risk of the trust winding up. "If liquidation is the end game, so be it; I am prepared to make the sacrifice to safeguard my future bonds (or notes)," said one noteholder who did not wish to be named.

Commenting on the equity of the note-restructuring exercise, Rickmers Maritime's chief executive Soeren Andersen said: "We are doing all we can to preserve value for noteholders and all other stakeholders, in order of their respective security interests."

On the business plan after a successful note restructuring, Mr Andersen emphasised a two-pronged approach: optimise fleet efficiency while pursuing cash-producing and value-enhancing business opportunities. This may include low-cost vessel acquisitions and the conversion of existing or acquired vessels for other purposes.

He said: "Being part of the Rickmers ecosystem gives us access to investment opportunities within the container shipping space, which we will take advantage of when they offer accretive value and capital is available."

Mr Andersen also reiterated that the trust "benchmarks operating costs continuously" to keep the numbers in line with the market.

He cited the decommissioning of five spot vessels as an example of keeping costs to "an absolute minimum".

"This is a better option financially than operating the vessels in the extremely low charter market," he said.