Options in Distress

What are the options exactly available to shipping companies in distress? In his presentation entitled “Afloat, Abreast, or Ahoy – Be in the Know”, Mr. Lionel Tay from Rajah & Tann LLP gave us his insights as a practitioner who is involved most recently in the Armada (Singapore) insolvency case.

One possible option is a scheme of arrangement that essentially entails a proposal being presented by the company to its creditors. In such an arrangement, creditors may be bound by the scheme to accept payment at a discount. The company’s management remains in place and provides some breathing space to contemplate the company’s future as a going concern. The tricky issue here is the company’s ability to gather enough support from its creditors who account for at least 75% of its total debts. Continue Reading

Law and Order

On the last Friday of April, the Maritime Law Association of Singapore presented its 2^nd Asian Maritime Law Conference entitled “Arrest, Insolvency and Pre-emptive Remedies in a Global Shipping Crisis”. The mood was somewhat sombre with many in the audience believing that the shipping crisis is still far from over. The mix of presenters included speakers from both the East and the West and brought great value and interest. Some of the more interesting takeaways for us, in no specific order, including the following:

-       IMF estimates that bank losses from US toxic assets could reach USD 4 trillion. If we compare this figure to the global syndicated loan amount of USD 3 trillion in 2008, this is equivalent to one lost year of financial activities.   Continue Reading

Default II

In a report earlier this week, Fearnley Fonds reported that “Armada’s Singapore unit filed for bankruptcy following defaults by Fortescue Metals amounting to about USD 200m over the duration of contracts to 2014 and defaults of contracts worth about USD 170m with an unnamed Indian charterer. “The cumulative value of the total number of claims which the company could be facing in the course of the next few days, or weeks, at the very least, would be in the region of USD 500m,” Managing Director Tommy Jensen Rathleff said in the filing. Among a host of 64 creditors, Kawasaki Kisen is owed about USD 95.5m, while Transfield Shipping is owed USD 113m, according to an affidavit filed by Armada. With rates at current levels we believe there will be more bankruptcies within the dry bulk market.”

Defensive Acquisition with Upside

On Tuesday, just a week after Quintana‘s press release announcing the termination of the sale process, Excel and Quintana jointly announced that Excel had, over the weekend, agreed to acquire Quintana pursuant to a definitive merger agreement whereby Quintana would become a wholly owned subsidiary of Excel. The purchase price will be approximately $2.2 billion (based upon Excel’s closing price of $33.00), including net debt of Quintana and other costs.

Under the terms of the agreement, Quintana shareholders will receive a combination of cash and stock. Each Quintana share will receive $13.00 in cash and 0.4084 shares of Class A common stock in Excel. Based upon Monday’s closing price, the offer represents a total value of $26.48 per share, representing a 57% premium to Quintana’s closing price on that day of $16.89 and a 34% premium to Quintana’s 30-day average price. The agreement provides for a cap of $31.38 based upon an Excel share price of $45.00 as well as price adjustments for dividend payments. Continue Reading