Rickmers Maritime announces S$102 million rights issue

Rickmers Trust Management Pte. Ltd., as trustee-manager (“Trustee-Manager”) of Rickmers Maritime (“RM”), wishes to announce that RM is undertaking a non-underwritten renounceable rights issue (the “Rights Issue”) to raise gross proceeds of up to approximately S$101.7 million (US$81.5 million).
The Rights Issue will be offered on a 1-for-1 basis at an issue price of S$0.240 per unit.
This represents a discount of 33.3% to the closing price of S$0.360 per unit (the “Closing Price”) on the Singapore Exchange Securities Trading Limited (“the “SGX-ST”) on 18 March 2013, and a discount of 20.0% to the theoretical ex-rights price of S$0.300 per unit (the “TERP”)1.
Extension of the VTL Covenant Waiver
RM has successfully secured an agreement with all its lending banks to extend the current VTL Covenant Waiver2 for a further period of one and a half years (the “Extended VTL Covenant Waiver”) to 29 December 2014. The Extended VTL Covenant Waiver grants RM an additional period of time to deleverage and prepare for future growth opportunities.
The Extended VTL Covenant Waiver is conditional upon the launch of the Rights Issue within six months from 15 May 2013. The Rights Issue will enable RM to repay the Top Up Facility3 and accelerate repayment of the remaining loan facilities over the period of the Extended VTL Covenant Waiver.
Mr Thomas Preben Hansen, Chief Executive Officer of RM, commented, “We are very pleased to announce this rights issue, on the back of which, we have agreed with our nine lending banks to an extension of our existing VTL covenant waiver by one and a half years. This period of time will allow Rickmers Maritime to further deleverage its balance sheet. Moreover a number of leading market commentators expect to see improved asset values and stronger charter hire rates for containerships by December 2014. This transaction gives Rickmers Maritime a stronger financial position to take advantage of a recovery in the market.”
Repayment of bank loans to improve financial flexibility and strengthen balance sheet Assuming the Rights Issue is fully subscribed, the full repayment of the Top Up Facility will result in the VTL covenant ratio of RM’s loan facility being reduced from 133% to 110%.
This vastly improves RM’s ability to be VTL compliant before the expiry of the Extended VTL Covenant Waiver. After the Rights Issue, RM’s gearing ratio is expected to reduce from 59.3% to 51.8% on a pro forma basis, which will significantly strengthen the balance sheet and provide potential opportunities for future financing and growth.
Maintaining attractive borrowing costs
RM has furthermore succeeded in maintaining the current borrowing costs of its bank facilities which are all priced at a rate of 1.75% per annum above 3-month US$ LIBOR. This is generally below the interest rates borne by comparable businesses. This competitive cost of debt should enable RM to sustain its steady cash flows, maintain distributions to unitholders and position RM for potential growth in 2014.
Maintaining distribution per unit (“DPU”)4 and improving DPU yield RM intends to maintain the quarterly DPU at 0.6 US cents for the financial year ending 31 December 2013 (“FY2013”). Based on the Closing Price, assuming that the Rights Issue is fully subscribed and a unitholder takes up his full entitlement at the Rights issue price whilst receiving his quarterly DPU of 0.6 US cents, he would receive an improved DPU yield for FY2013 of approximately 10.0% over the TERP5.
Committed to reach full compliance with loan covenants
The accelerated repayment of RM’s loan facilities is a further commitment to deleverage RM and bring it to a position to exit its current loan restrictions, repositioning RM to resume its growth strategy and eventually increase its distribution to unitholders.
Mr Hansen went on to comment, “In a shipping industry which has witnessed significant asset value volatility over the past few years, this rights issue and extension of the VTL covenant waiver provides further comfort and stability for Rickmers Maritime’s unitholders. It maintains our attractive debt financing costs at their current level of 175bps above US$ LIBOR and paves the way for a continuation of quarterly distributions to our unitholders of 0.6 US cents, giving an improved DPU yield for FY2013 of 10.0% over the TERP. We are confident that with the strong support of our Sponsor and loyal unitholders, we can together re-ignite Rickmers Maritime’s growth story.”
Strong support from the Sponsor and Independent Directors To demonstrate its support for the Rights Issue, the Sponsor of RM6 has, through its subsidiaries, provided undertakings to subscribe and pay in full, for such number of Rights units to maintain its current unitholding percentage level.
Furthermore, the Independent Directors, Mr Lim How Teck and Mrs Lee Suet Fern, have each provided an undertaking that they will subscribe and pay, in full, for their pro-rata entitlements.
Use of proceeds Assuming that all unitholders subscribe for their entitlements to the Rights units, the net proceeds of the Rights Issue are expected to be approximately S$98.5 million (US$78.9 million). 100% of the net proceeds will be used to repay the Top Up Facility and other bank loans.
The Trustee-Manager has appointed the Hongkong and Shanghai Banking Corporation Limited, Singapore Branch (“HSBC”) as the issue manager for the Rights Issue.
Source: Rickmers Maritime