Category: Rickmers
Rickmers – BT
Rickmers raises Q4 DPU by 5%
RICKMERS Maritime raised its distribution per unit (DPU) for its fourth quarter ended Dec 31, 2010 by 5 per cent, from 0.57 US cents to 0.6 US cents.
Increased for the first time in four quarters, the DPU represents a payout of 14 per cent of income available for distribution. The trust posted a 31 per cent rise in net profit for the quarter, from US$15.3 million to US$19.9 million.
The jump in profit was driven primarily by a US$7.3 million writeback in impairment charges on one of its vessels – Kaethe C. Rickmers – because the vessel’s charterer is extending the charter period for another 12 months at a higher daily rate of US$23,888, compared with its current rate of US$8,288.
The new rate will kick in from March 25, restoring the revenue of the trust’s portfolio to ‘pre-crisis levels’, according to Thomas Preben Hansen, chief executive officer of Rickmers Trust Management Pte Ltd (RTM).
Its income available for distribution for the quarter rose 2 per cent, to US$18.09 million while revenue dipped 4 per cent, from US$38.1 million to US$36.8 million, for the quarter. For the full year, the trust posted a net loss of US$28.6 million, against a net profit of US$40.7 million from a year ago.
It owed the hit to its bottom line largely to a one-time US$64 million compensation payment in Q3 for cancelling its order of seven vessels in the throes of the financial crisis. Its revenue stayed flat, inching up one per cent to US$147 million, weighed down by lower income contribution from Kaethe C. Rickmers, after it was re-delivered to the trust from Maersk early last year.
For the full year, income available for distribution shrank 5 per cent to US$72.13 million while its DPU dropped 41 per cent, from 3.91 US cents to 2.31 US cents. It repaid a total of US$105 million in bank debt in FY 2010 and has US$671 million in bank debt outstanding, as at the end of last year.
The trust posted a fleet utilisation rate of 99.93 per cent for the quarter and 99.88 per cent for the full year. According to Mr Hansen, the trust has no immediate plans to expand its fleet of 16 containerships or to diversify into other types of vessels.
‘We will be over time evaluating the various transactions in the market, but for the time being, ship values have increased a lot and there will be more increases to come. We will focus on our balance sheet,’ he said yesterday.
From today, Gerard Low Shao Khangwill take over from Quah Ban Huat as RTM’s chief financial officer. Mr Quah had tendered his resignation in October last year, in order to ‘pursue other interests’.
Shipping Trusts – BT
The lowdown on shipping trusts
IT hasn’t been much fun being a shipping trust, lately. If your creditor isn’t leaning on you, your client is reneging on you or asking for a 30 per cent discount on charter rates.
At some point in the past 18 months, at least one or a combination of these three vexing situations has been a reality for all three shipping trusts listed here – Rickmers Maritime Trust, First Ship Lease Trust (FSL) and Pacific Shipping Trust (PST).
Consequently, the past 18 months haven’t been a barrel of laughs for investors either. The share price for PST has lost about 23 per cent of its offer price value since the trust listed in 2006, while FSL and Rickmers have lost 55 per cent and 75 per cent respectively since they went public in 2007.
While the headlines for the trust sector have been glum in general, they have varied for each of the trusts across a spectrum of harrowing news.
Glum news
At one end of the spectrum has been Rickmers, which found itself unable to raise enough equity to buy seven vessels that it had committed itself to for US$918.7 million, even as it scrambled to refinance US$130 million in loan facilities with its banks.
About the same time, charterer Groda Shipping & Transportation told FSL to take back two tankers about four years early in May – but not before running up a US$4.1 million tab for unpaid bunker bills that led to tanker arrests and a 10 per cent dive in FSL’s share price.
Amid renewed fears of counter-party risk, some threw up their hands. OCBC Investment Research’s Meenal Kumar ceased coverage of the entire sector in June, citing ‘subdued trading volumes’. He also noted the difficulty of getting publicly available information on some of the trusts’ clients, such as Groda.
At the opposite end of the spectrum, however, PST’s trials were milder by comparison – and already seem to be receding into the past. Chilean liner CSAV, which charters two vessels from PST, caused a bit of a flap in April last year when it looked likely to negotiate a temporary 30 per cent reduction in charter hire payments.
But now, with CSAV’s turnaround in fortunes – it posted a record Q3 profit earlier this month – the threat of renegotiation has been reduced to a panicky footnote.
It is fitting that for Q3, only PST reported an increase in its distribution per unit (DPU) – albeit a small one of 1.7 per cent year on year.
Of the lot, PST has been favoured by analysts for its conservative financing strategy. It also scored points for its canny move to diversify into bulk carriers and multi-purpose vessels in measured doses that precluded any frantic equity-raising exercises.
FSL, on the other hand, is still being hobbled by the fall in revenue from the two tankers that Groda returned prematurely. Its Q3 distribution per unit of 0.95 US cent was 36.7 per cent lower year on year – and the outlook appears subdued.
DBS Group Research’s Suvro Sarkar cut DPU estimates for FY 2011 by 17 per cent to about one US cent per quarter.
FSL’s payout ratio is at 40 per cent as of Q3 – which is relatively prudent and not abysmal unless you are an investor who remembers getting 100 per cent of distributable cash flow in 2008 before the sector hit an ice patch.
What FSL does have in its favour is its vessel portfolio, which is the most diversified of the three – at a time when diversification has become a hedge against events that the sector cannot control, such as falling vessel values.
Diversification, on the other hand, is not on the immediate horizon for Rickmers’ all-containership fleet. After a period of giddy acquisition that preceded its financing woes – at one point, it had 11 containerships waiting to be delivered within a two-year span – it will be content with its existing 16 while it regroups.
While containership rates have recovered convincingly and are poised to improve next year, the much-dreaded double dip could undo it all.
And all else remaining equal, there is the 0.6 US cent cap on Rickmers’ DPU per quarter. It will be in place for at least as long as the trust is protected by the value-to-loan waiver granted by its creditors for up to three years. Its latest DPU of 0.57 US cents was a payout of just 13 per cent of distributable cash flow.
Stable and boring bet
It could work out for everyone, of course, and the sector could become the more exciting alternative to Reits that it was originally branded – and not in a way that causes indigestion.
But as things stand, PST – which its sponsor’s MD called ‘stable and boring’ in March, according to Lloyd’s List – looks like the sector’s best bet. When ‘boring’ is the best adjective for a sector, investors might just stock up on antacid tablets and move elsewhere.
Rickmers – BT
Rickmers posts US$54.6m Q3 loss after compensation hit
RICKMERS Maritime posted a net loss of US$54.6 million for its third quarter ended Sept 30, 2010, against a net profit of US$9.2 million for the corresponding period a year ago.
The blow to the trust’s bottom line was dealt by a US$64 million payment of compensation to Polaris Shipmanagement Company Limited for not taking delivery of seven vessels.
Excluding the one-off payment, profit from operations would have been US$9.4 million for the quarter.
Its income available for distribution for its third quarter slipped 4 per cent, from US$19.2 million to US$18.3 million.
It also posted a 4 per cent dip in charter revenue, from US$38.1 million to US$36.7 million, today.
Rickmers kept its distribution per unit (DPU) at 0.57 US cents, unchanged from its previous three quarters, representing a payout of 13 per cent of income available for distribution.
Year-to-date, the trust posted a 7 per cent drop in income available for distribution, to US$54 million.
Revenue for the same period rose 2 per cent to US$110.2 million.
It recorded a net loss of US$48.5 million for the period, against a net profit of US$25.5 million a year ago.
The trust’s fleet of 16 container ships saw a 99.63 per fleet utilisation rate for the quarter.
The remaining committed charter revenue as at Sept 30 stood at US$785 million.
‘The container market has experienced a real bull run this year, but the peak period has come to an end. We do expect to see a softening of charter rates in the coming months,’ said Thomas Preben Hansen, chief executive officer of Rickmers Trust Management, the trust’s trustee manager.
Shipping Trusts – OCBC
Not out of the woods yet
1Q10 review: united in YoY DPU declines. 1Q10 results for the Singapore-listed shipping trusts under our coverage were largely in line with our expectations. Pacific Shipping Trust (PST), FSL Trust (FSLT) and Rickmers Maritime [RMT, NOT RATED] all reported YoY declines in DPU ranging from 19.1%-73.4% primarily due to lower distribution payout levels. FSLT, PST, and RMT are currently paying out 55%, 43%, and 13% of cash earnings respectively to unitholders.
RMT concludes negotiations with sponsor and lenders. In Apr, RMT’s sponsor agreed to discharge RMT’s obligation to purchase seven newbuild vessels for US$918.7m in exchange for a US$64m penalty. Additionally, RMT’s lenders also agreed to a loan maturity extension and to waive valueto-loan (VTL) coverage requirements. The agreement with the lenders is fairly restrictive: 1) the US$130m loan is now amortizing; 2) RMT has to pay a higher cost of debt in exchange for the VTL waivers; and 3) RMT cannot pay out more than 0.6 US cents/quarter while its VTL coverage is breached in any of its loan tranches. These agreements do take RMT away from the brink of bankruptcy but also create, in our opinion, a stasis situation where RMT cannot exert much control over its cash flows. The end point is also unclear (as we do not know what the VTL gap is). RMT could just bide its time under these agreements or possibly raise fresh equity (with a much recovered unit price) and get out of these restrictive agreements.
Counterparty issues remain. In sharp counterpoint to the RMT developments, FSLT announced earlier this month that its charterer Groda Shipping has requested the trust to take re-delivery of two of its product tankers that were under a sevenyear bareboat charter agreement. The charterer indicated that “it has become increasingly difficult for them to improve their cash flow” due to 1) escalating bunker prices; 2) underutilization of the vessels under the Contract of Affreightment (CoA); and 3) “limited options to generate incremental revenue given the trading area of the vessels”.
Growths plans offset by continuing risks. The sector, in our view, remains highly vulnerable due to counterparty risks – and this incident highlights that the broader shipping industry is not out of the woods yet. We expect both PST and FSLT to acquire new vessels this year but the key challenge will be to secure high quality counterparties and still make an accretive deal. Maintain NEUTRAL view. PST is our preferred pick because of its balance sheet strength.
Rickmers – BT
Rickmers cuts Q1 DPU by 73% to conserve cash
It expects funding issue to be resolved with recent signing of 2 term sheets
RICKMERS Maritime kept its income distribution conservative in continued efforts to conserve cash with a distribution per unit (DPU) of 0.57 US cents – 73 per cent lower compared to Q1’09 – for the first quarter ended March 31.
However, its management stressed that the trust has recently signed two important term sheets that are finally expected to resolve its funding issues.
Last week, Rickmers announced that a term sheet has been signed with its lending banks for a five-year extension of its US$130 million top-up loan facility – which matures April 30 – and a waiver of its value-to-loan covenants for up to three years.
Another term sheet has also been signed with Polaris Shipmanagement Company, which is a wholly owned subsidiary of the Rickmers Group, to discharge the trust from its obligations to purchase three 4,250 TEU and four 13,100 TEU container ships worth US$918.7 million.
As such, it will pay Polaris compensation of US$64 million, of which US$15 million will be paid in cash and the balance converted into an interest bearing convertible loan to the trust, maturing in 2014.
During the quarter, income available for distribution slipped 8 per cent to US$17.93 million while net profit took a 51 per cent tumble to US$5.43 million, mostly due to US$5.3 million of unrealised losses from two of its interest rate swaps. Earnings per unit were 1.28 US cents, down from 2.61 US cents.
Charter revenue was 14 per cent higher at US$37.16 million compared to the previous corresponding quarter, thanks to maiden contribution from its 4,250 TEU containership Hanjin Newport, as well as full-quarter contributions from two 4,250 TEU vessels.
The Kaethe C Rickmers, a 5,060 TEU containership (formerly Maersk Djibouti), has also been fixed on a 12-month charter, although at a lower rate.
The trust continued to maintain a high level of efficiency on the operations front with no off-hire days in Q1’10, Rickmers said.
Cash flow from operating activities increased by two per cent to US$27.64 million thanks to higher charter revenue, though this was offset by increased expenses.
‘With the return of consumer demand we have good reason to remain cautiously optimistic about the prospects of the container shipping industry. Our focus in the coming months is to finalise documentation and seek the necessary approvals to conclude the various agreements with our creditors,’ highlighted Thomas Preben Hansen, CEO of trustee-manager Rickmers Trust Management.
Rickmers Maritime’s portfolio currently comprises 16 containerships, of which 15 are chartered out for periods of between seven and 10 years.