Commentary: Is Liquidation the Only Way for Rickmers Bondholders?

Date: December 12, 2016

First published in Business Times on 12 December 2016

At the Rickmers Maritime Extraordinary General Meeting (EGM) held on 31st October 2016, the unitholders approved two resolutions. Resolution one was to approve the proposed issue of 1,319,434,076 new units pursuant to the proposed restructuing of the notes. This will result in the noteholders receiving 60% of the enlarged total number of units. The second resolution, the Extraordinary Resolution, was to approve the propsed winding up of Rickmers Maritime in the event of an unsuccessful restructuring. In essence, the proposal to noteholders is 60% equity in the company, and $40 million coupon payment due in 2023 with a step up interest from 2.7% to 5.2% to be paid from 2019 – 2023 and a special one off $500,000 coupon payment upon successful restructuring.

Noteholders were not able to provide one voice to the issuer. The issuer was also not aware who the noteholders were, although some had approached the issuer directly and had few sessions of discussions. A few approached Securities Investors Association (Singapore) but SIAS too was not able to reach out to all the noteholders. Only the banks knew.

Pursuant to a few noteholders reaching out to SIAS to provide the platform to aggregate and discuss their predicament and to find possible solutions, SIAS met with the issuer and discussed the issues and the possible solutions. With the help of the issuer, SIAS held a dialogue on Nov 2 which 53 noteholders attended. The issuer, Rickmers Trust Management, legal and liquidation experts were also invited by SIAS to meet with the noteholders to explain the proposal and answer their queries. While the dialogue session was generally appreciated by the noteholders, it also brought to the forefront the reservation on the part of some of the noteholders, of the basis for the offer being anchored on an uncertain future.

The offer of $40 million coupon payment at the end of 2023, was troubling their minds, given the uncertainties in the shipping industry. They also strongly expressed their desire to communicate with the Rickmers family. What they expected was some support by way of either injection of capital or some sort of a restructuring model.

Also, the fact that the aforesaid offer to noteholders by the Trust was the only one on the table, on a take-it-or-leave-it basis, didn’t strike a chord with them. At the end of the meeting, we called on the noteholders to seriously consider if they could come up with alternative solutions, if they were still not inclined to accept the only offer on the table.

SIAS now understands that to-date, Rickmers Maritme Trust has received only one counter proposal, from a source other than the noteholders, which suggests liquidating the Trust.

In our view, any proposal that would result in liquidation is not in the interest of all stakeholders, and, for that reason, we are not in support of it. What was and still is expected is a restructure that would give hope not only to the noteholders, but to all stakeholders.

Until such time a solution that does not involve liquidation emerges, the only hopeful solution is the one put forward by the trust managers currently. Noteholders, will have to act rationally and not emotionally in their interest.

They, will of course, take into consideration the view of the independent auditor that the Trust may have insufficient cash to fulfill obligations. In last Friday’s letter to noteholders, Rickmers Maritime Trust said: “Despite various measures to reduce costs, cash in one of our three revenue silos is exhausted and another is quickly depleting this month. We remain in intense discussions with our senior lenders to address the cash depletion in these two silos, primarily through selling vessels.”

“We have also requested for interim working capital to tide through this critical period, but, as of yet, there is no gurantee that any financial support will be extended. Our cash position remains very precaurious as we cannot access the third cash silo at this stage.”

Needless to say, that when a company is selling it’s assets at depressed prices today, they will also lose the future cash flows to sustain the company.

The issuer is fighting a very stretched cash situation and if they have to sell vessels to fund their operations, it Is not in anyone’s interest.

In the meantime, today I have made contact with Dr Ignace Van Meenen, Chief Executive of Rickmers Group and have conveyed the sentiments of the noteholders and their wish to hear from the Rickmers family. The Rickmers family reacted immediately and have said through Dr Ignace Van Meenen as follows:

“Rickmers Holding and the Rickmers family recognize and understand the feelings of the noteholders and we share their pain. We are fully aware of this unfortunate situation and we are following it closely. Throughout the process, we have been very involved in discussing possible solutions; we have never taken our hands off the wheel. All that we can do to improve the situation, we have done.”

Dr Ignace Van Meenen has also indicated that Mr Bertram R. C. Rickmers will be making a public statement in due course.

We hope still that there will emerge a better solution for noteholders to approve. But if, by deadline none appears, then noteholders will have to seriously consider whether going with what they have on hand is better than allowing liquidation to take place, which is not in the interest of unsecured investors, be they bond or unit holders

David Gerald
Founder, President & CEO
Securities Investors Association (Singapore)