PST – BT

Pacific Shipping charterer planning capital boost

PACIFIC Shipping Trust (PST) yesterday took the initiative to give an update on developments at one of its charterers, major Latin American line Compania Sud Americana de Vapores (CSAV), which earlier this week said it was in discussions to strengthen its financial position by about US$750 million.

CSAV, which charters two of PST’s 12 vessels, on Monday said that as part of a financial strengthening plan, it recently appointed HSH Corporate Finance to oversee a restructuring plan to strengthen its operating cash flow and consolidate its South American franchise.

Among CSAV’s plans to boost capital is the decision to significantly increase its equity base. Thus, next to the capital increase of US$130 million currently being implemented, the company will ask its shareholders for an additional equity increase of US$220 million. Ship owners have also been asked to contribute US$400 million to the equity base of the company.

The plan seems to have found positive reception among investors with CSAV’s shares rising earlier this week.

Details of the proposal are being worked out. The company is asking charterers for a temporary reduction of charter hire payments of about 30 per cent, part of which will be capitalised.

PST chief executive Alvin Cheng, however, clarified that participation in the scheme is on a voluntary basis and the trust has not received further details about what is expected of it. ‘We feel very positive that CSAV has undertaken this exercise to improve its cash position,’ he said.

While Mr Cheng conceded that there may be revenue reduction with some effects on distribution per unit, he maintained that PST would not be too adversely affected. He added that it is difficult to give guidance on what the impact will be until further discussions with CSAV.

‘Despite the potential revenue reduction, PST’s business model and fundamentals remain sound and stable. Our cash conservation strategy thus far will provide us with sufficient headroom to meet our current financial obligations. We will provide our unitholders with updates on CSAV’s restructuring plan as and when the details are confirmed,’ said Mr Cheng.

PST shares closed unchanged at 17 US cents yesterday.