On Wednesday, the Singapore-based shipowner Rickmers Maritime Trust (RMT) said that investors had rejected a restructuring plan for $70 million in maturing debt. This is second time that its bondholders have turned the proposal down. RMT said that it would continue talks with senior investors on selling ships to raise capital.
Trading in RMT’s stock was suspended in mid-November when the firm missed a $3 million interest payment and warned that it could not guarantee the continuance of its operations. RMT has cautioned its investors that liquidation or judicial management would likely mean "zero recovery for noteholders."
Like other Singaporean maritime firms, RMT faces an extra hurdle in negotiations with creditors: the firm says that local regulations limit liquidity and pricing transparency in the corporate bond market, giving bondholders an incentive to hang on to their investments and resist restructuring. The minimum bond denomination is set at $170,000, and bondholders must be "accredited" investors with significant assets. RMT asserts that these requirements limit the pool of potential buyers, which reduces bond trading activity and makes it difficult to price debt.
Structural changes create difficulties for Panamax owners
RMT is a non-operating shipowner with 15 Panamax container vessels. Container carriers face challenges from overcapacity, and the Panamax segment has been particularly hard-hit: the enlargement of the Panama Canal allows more efficient post-Panamax ships to trade between the Pacific and Atlantic basins, reducing demand for older, smaller Panamax vessels.
In early December, RMT said that it had laid up five of its ships due to low demand. Six more are operating on the spot market, where charter rates have fallen as low as $4,500 per day – well below recent estimates of operating costs. A decline in rates means a decline in value, and Panamax container vessels have lost as much as two thirds of their worth over the past twelve months, forcing firms like RMT to take impairments.
In a move emblematic of the state of the market, RMT recently scrapped the 2009-built India Rickmers to settle a loan from Commerzbank. She was purchased new for $60 million just seven years ago, but her value as an operating vessel was recently estimated at $6 million. She is believed to be the youngest container ship ever scrapped.