Rickmers – OCBC

April loan maturity is the next test

DPU down 5% QoQ. Rickmers Maritime posted US$38.1m in 4Q revenue, up 29% YoY driven by vessel acquisitions and flat QoQ. RMT will distribute 0.57 US cents per unit, down 75% YoY and down 5% QoQ. Note the sponsor Rickmers Group will not defer its right to its share of the distribution as it had in 2Q09 and 3Q09. Full-year distributable income was within 4% of our estimate. RMT said it could not give forward guidance for DPU because of ongoing discussions with lenders, dragging on since 1Q09. RMT is geared at 1.96x debt-to-equity as of 31 Dec.

April loan maturity is the next test. RMT has so far been able to stave off the most immediate crisis points: the last three newbuild deliveries have been warehoused by its sponsor and a loan-to-value covenant review is on hold while discussions with stakeholders including its sponsor and ten lending banks continue. The next test, in our view, is the US$130m top up facility maturing this April, part of a total US$139.8m in loans up for repayment this year. It remains to be seen if lenders HSH Nordbank, DBS Bank and Citibank are willing to refinance the loan – tricky due to the steep fall in vessel values. We note that RMT has US$110.7m in cash as of 31 Dec, but it is unclear if the other seven banks will be willing to let these funds be utilized to pay off the maturity due to competing interests. How RMT handles this loan maturity could be a good signal of the extent of both lender and sponsor support.

We have further refined our valuation methodology. In an effort to parse market expectations, we introduce a best case valuation of RMT under a scenario where the order book ‘disappears’ at no cost to the trust or unitholders and where RMT is easily able to re-finance the top-up facility maturing in two months. We believe existing investors who are playing the waiting game are in a sense betting on this scenario but the chances of it materializing, in our opinion, are slim. While it is quite possible that RMT manages to resolve its debt and order book concerns – we continue to believe such a resolution may come at the expense of unitholders’ interests, for instance if RMT raises funds through a dilutive private placement. Maintain SELL with fair value revised up to S$0.18 from S$0.15 previously due to the methodology adjustments.