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.

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