(Bloomberg) -- A Singapore-based shipping trust that operates container ships is asking creditors for leniency on about $253 million of debt, in the latest sign of debt woes in the industry and in the city-state.
Rickmers Maritime won’t be able to repay $179.7 million of senior debt due in March 2017 and the interest and principal on S$100 million ($73.3 million) of notes due in May 2017, it said in an investor presentation filed to the Singapore Exchange Thursday. It’s asking investors to exchange their debt with S$28 million of new perpetual securities to avoid potential liquidation or judicial management that it says would be "likely to result in zero recovery for noteholders."
Rickmers adds to a list of troubled borrowers in the global shipping industry, which is grappling with slowing economic growth and a mountain of debt. The woes have claimed South Korea’s biggest container line Hanjin Shipping Co., which got U.S. bankruptcy protection last week, along with Swiber Holdings Ltd. and AusGroup Ltd. Rickmers’ stumble also increases signs of stress among Singapore borrowers, after Marco Polo Marine Ltd. said this week it plans to ask bondholders for approval to delay paying debt.
“The shipping and oil and gas space has really been a minefield in the bond market,” said Terence Lin, an assistant director of bonds and portfolio management at fund researcher iFast Corp. in Singapore. “One of the positives from this is that there’ll be increased scrutiny on very levered companies, and a push for management to take corrective plans or pre-empt liquidation outcomes.”
Adverse market conditions have affected charter rates, hurt Rickmers’ financial performance and reduced its ability to service its debt obligations, according to the investor presentation. The company had $23.1 million of cash as of June 30 and $271.3 million of debt due in 2017 and its debt maturity profile is not sustainable, it added.
Rickmers has proposed to pay a coupon of 3.88 percent on its perpetual convertible securities, before stepping up the rate from November 2019, with additional increases taking it to 8.28 percent from November 2023, according to its filing.
The trust has received a firm offer from the senior lenders led by HSH Nordbank AG and DBS Group Holdings Ltd. to refinance up to $260.2 million of loans, according to a filing earlier this month. It appointed PricewaterhouseCoopers and Morgan Lewis Stamford as advisers last month.