Rickmers unitholders agree to new issuance for debt, liquidation if deal falls through

UNITHOLDERS of Rickmers Maritime Trust have approved the issuance of new units for a proposed debt restructuring deal, but want the container ship owner to be liquidated if a deal cannot be reached.

At an extraordinary general meeting on Monday, unitholders approved a resolution to issue 1.3 billion new units, or 1.5 times the existing number of units, as part of a proposal to restructure S$100 million of bonds. Unitholders also gave trust manager Rickmers Trust Management the green light to liquidate the trust if the restructuring is unsuccessful.

The approval for new issuance will allow Rickmers to dangle a fatter carrot before holders of its 8.45 per cent notes due 2017.

Rickmers is proposing to convert S$150,000, or 60 per cent, of each S$250,000 denominated note into new Rickmers units. The maturity on the remaining S$100,000 will be extended to Nov 15, 2023, from the current May 15, 2017, and the coupon will also be cut to between 2.7 per cent and 5.2 per cent. A special upfront coupon payment of S$1,250 for each note will also be made on the date that the new units are issued.

Based on Rickmers' unit price of 3.3 Singapore cents as at 4:30pm on Monday, just the conversion of the 60 per cent in principal amount alone would represent a haircut of about 70 per cent for Rickmers bondholders. That assumes a post-dilution theoretical unit price of about 1.32 Singapore cents after 1.3 million new units are issued.

Rickmers noteholders will meet on Nov 9 to vote on the restructuring. The company will also take part in a dialogue session with the bondholders on Nov 2 to discuss the restructuring. The Securities Investors Association (Singapore) is organising that session.

If Rickmers can strike a deal with noteholders, it will not just be able to stave off voluntary liquidation. The trust will also be able to obtain a new amortising term loan facility of up to US$260.2 million to refinance most of its outstanding bank debt.