Investors holding Rickmers Maritime notes hit out yesterday after the trust's debt refinancing plan indicated they could lose as much as 60 per cent of their investment.
Anger was sparked when the trustee-manager told an informal note-holder meeting that it would not be able to repay US$179.7 million (S$245.5 million) of senior debt due in March next year or the interest and principal on $100 million of notes due in May next year.
It wants note holders to exchange their debt with $28 million of new perpetual fixed-rate, step-up convertible securities to avoid potential liquidation or judicial management - a process "likely to result in zero recovery for note holders".
These perpetual bonds are to be convertible at any time into units of the trust at an initial fixed conversion price of 16 cents, subject to adjustment for various events. Rickmers units sank 12.9 per cent to close at 6.1 cents yesterday.
Rickmers, whose market capitalisation stood at $53.7 million, said the perpetual bonds would be convertible into about 20 per cent of its existing units, so unit holders also face dilution upon conversion.
The proposed haircut was not an easy pill to swallow. During the meeting at Maxwell Chambers, which lasted over two hours, many visibly upset bond holders urged the trustee-manager to come up with a more reasonable offer.
One bond holder told The Straits Times later: "I felt the (management was) not open to discussion. They came out with a fixed mindset, presenting what they wanted to do and basically wanting to push ahead with it, which I think was not so pleasant to bond holders."
At the meeting were around 60 investors who each had sunk $250,000 or more into the notes, although it was not clear how much they represented in terms of overall holdings.
Rickmers, which is among a growing list of financially stressed firms here hit by dire market conditions in the global shipping industry, told bond holders that the trust was not trying to rob them of their money, but that it faced limited options.
It added that the proposal was aimed at delivering the most upside to note holders.
If Rickmers and its note holders cannot agree to a debt exchange, the result could be sudden death for the cash-strapped container ship operator. The trust last week said it had received a firm offer for a restructured secured amortising term loan facility of up to US$260.2 million to refinance all of its outstanding debt - but the lifeline will fall through if the notes are not successfully restructured.
The Straits Times understands that, as of last evening, over 30 bond holders had formed a steering committee, and plan to appoint a legal adviser to negotiate better terms with the trustee-manager.
Mr Soeren Andersen, the chief executive of the trustee-manager, told The Straits Times in a statement: "The situation our note holders are in is not pleasant, and we sincerely empathise with them.
"We are aware of their views and will take them into consideration. Our focus is on delivering a solution that preserves as much value as possible in the shortest time, avoiding maximum loss."