Showing Resilience

Last Thursday, Pacific Shipping Trust (“PST”) released its full year results and as expected, there were no surprises. Key figures – revenue, operating profit and distributable income were largely in line with analyst expectations. Gross revenue in 4Q09 grew 8% to USD 15.6 million from the corresponding quarter in 2008, boosted by contributions from a vessel chartered to Compania Sud Americana de Vapores S.A. (“CSAV”). Net profit for the full year of 2009 increased 49% to USD 27.4 million while distributable income grew correspondingly by 46% to USD 27.1 million. With a fleet of 12 containerships all on long term charters, PST has contracted charter income of USD 300 million over the next 7 years.

For shipping trust investors, credit risk remains a top concern. And unlike the other two shipping trusts, PST has only two charterers – its sponsor Pacific International Lines (“PIL”) and CSAV and both have been facing immediate challenges in the container shipping business. PST has chartered 10 vessels (2 Panamaxes and 8 Handymaxes) to PIL for 6 to 8 years and 2 Panamaxes to CSAV for 5 years. Questions at the results briefing were therefore naturally centered on the financial standings of both companies.  Continue Reading

A Good Citizen

For the benefit of our readers in Asia, we reproduce some excerpts on First Ship Lease (“FSL”)’s suspended USD 200 million notes offering from our sister publication Freshly Minted before we take a little closer look at the motivations behind the shipping trust’s offering. 

“Philip Clausius is a committed man. He moved FSL to Singapore and has become a fixture in the shipping community. But even this was not enough. To further demonstrate his commitment and cement his presence locally, he has become a Singaporean citizen. So it came as no surprise that when the idea of a bond issue was broached, Mr. Clausius wanted a deal done that would tap both the Asian and U.S. investor bases, not just a straight 144A issue marketed to U.S institutional investors, which may have well been easier. Mr. Clausius understood that once established as a “local” issuer in Asia the rates would become highly competitive. Continue Reading

Covenants Waived

Last week, First Ship Lease Trust (“FSL Trust”) announced that they had come to terms with their bankers with respect to existing credit facilities. The amendment incorporates the following main terms.

During the loan to value covenant waiver period which extends until the end of 2Q 2011:

-          The minimum coverage ratio of the charter-free fair market value of FSL Trust’s vessel portfolio over its outstanding indebtness will be reduced from 145% to 100%. Continue Reading

Rickmers Maritime in Focus

On Monday, Rickmers Maritime announced a 67% year-over-year increase in net profit, largely due to an enlarged fleet in 2008. In the hour long analyst conference call, questions asked centered on the following three issues:

1) Potential loan-to-market value covenant breach in existing loan facilities

Management pointed out that the current loan to value (LTV) ratio is within range based on valuations conducted last December, but at the same time cautioned that continuing decline in ship values may impact LTV covenants under the current terms of loan facilities. Many analysts in Singapore have expressed concerns that the plunging asset valuations could lead to technical defaults among the shipping trusts (with the exception of Pacific Shipping Trust) and this could be one reason for the lackluster share performance of the trusts. While banks have the right to request revaluations at any time and any breaches in covenants could lead to a re-pricing of debt, we believe lenders are not likely to call in the loans as long as the shipping trusts continue to remain financially sound with strong cash flows. Rickmers Maritime has cash flow visibility until 2020 with about USD 2 billion in committed charter revenue and so far none of the charterers have approached the shipping trust for charter rate renegotiations or early vessel delivery.    Continue Reading