Commentary

Is liquidation the only way for Rickmers note holders?

At the Rickmers Maritime extraordinary general meeting held on Oct 31, unit holders approved two resolutions.

Resolution 1 was to approve the proposed issue of 1,319,434,076 new units, pursuant to the proposed restructuring of the notes. This will result in the note holders receiving 60 per cent of the enlarged total number of units.

The second resolution, the extraordinary resolution, was to approve the proposed winding up of Rickmers Maritime, in the event of an unsuccessful restructuring.

In essence, the proposal to note holders is 60 per cent equity in the company, and a $40 million coupon payment due in 2023, with a step-up interest from 2.7 per cent to 5.2 per cent to be paid from 2019 to 2023 and a special one-off $500,000 coupon payment upon successful restructuring.

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

 
 
 

Pursuant to a few note holders reaching out to Sias to provide the platform to aggregate and discuss their predicament and to find possible solutions, Sias met the issuer and discussed the issues and the possible solutions.

With the help of the issuer, Sias held a dialogue on Nov 2which 53 note holders attended. The issuer, Rickmers Trust Management, and legal and liquidation experts were also invited by Sias to meet the note holders to explain the proposal and answer their queries.

While the dialogue was generally appreciated by the note holders, it also brought to the forefront the reservation, on the part of some of the note holders, of the basis for the offer being anchored on an uncertain future.

The offer of a $40 million coupon payment at the end of 2023 was troubling their minds, given the uncertainties in the shipping industry. They also strongly expressed a 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 note holders 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 note holders 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 Maritime Trust has received only one counter- proposal, from a source other than the note holders, 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 restructuring that would give hope not only to the note holders, 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. Note holders 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 fulfil obligations.

In last Friday's letter to note holders, 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 interim working capital to tide through this critical period, but, as of yet, there is no guarantee that any financial support will be extended. Our cash position remains very precarious as we cannot access the third cash silo at this stage."

Needless to say, when a company is selling its assets at depressed prices today, it will also lose 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, I have made contact with Dr Ignace Van Meenen, chief executive of Rickmers Group, and have conveyed the sentiments of the note holders and their wish to hear from the Rickmers family.

The Rickmers family reacted immediately and has said through Dr Van Meenen as follows: "Rickmers Holding and the Rickmers family recognise and understand the feelings of the note holders 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 Van Meenen has also indicated that Mr Bertram R. C. Rickmers will be making a public statement in due course.

We still hope a better solution will emerge for note holders to approve. But if, by the deadline, none appears, then they 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 is the president and chief executive of the Securities Investors Association (Singapore).
A version of this article appeared in the print edition of The Straits Times on December 12, 2016, with the headline 'Is liquidation the only way for Rickmers note holders?'. Print Edition | Subscribe