Oslo-listed feeder owner and operator MPC Container Ships is looking to amend the terms of its $200 million bond issue and collect fresh cash in order to mitigate the negative impact from COVID-19 on the company’s liquidity.
To that end, MPC Container Ships Invest B.V., the company’s wholly-owned subsidiary, has requested Nordic Trustee AS as Bond Trustee and Security Agent to summon to a bondholders’ meeting for July 3, 2020.
Following the outbreak of the pandemic, the feeder company has been faced with lower charter rates and lower fleet utilization as global demand for containerised freight crumbled.
MPCC bled red in the first quarter of 2020, posting a net loss of $10.7 million, a quarter which should have seen the company move into the black for the first time since being launched in 2017.
Due to the pandemic, idle containership capacity has increased from 6.0% at the end of 2019 to ~11.5% mid-May 2020, and feeder charter rates continue to trend lower, with rates for 2,000 TEU vessels currently at $6,900/day, down 26% compared to primo 2020.
“Consequently, the sale and purchase market is currently almost non-existing and strong downward pressure on vessel values is expected in the short- to medium-term,” Nordic Traustee said in the summons.
Due to the lower cash inflow, the group’s ability to meet its obligations from loan agreements, have been challenged, hence the group is proposing amendments to its financing arrangements.
“The failure of the group to achieve the proposed amendments could have a material adverse impact on the group’s ability to satisfy its payment obligations and ultimately a risk of a potential bankruptcy (full liquidation) as the ultimate consequence thereof,” the feeder owner and operator said.
“There is further a risk that the group may continue to be unable to satisfy its payments obligations even if it completes the proposed amendments to the group’s financing. “
MPC Container Ships has developed a restructuring and recapitalization plan to strengthen the balance sheet and bridge the short-term liquidity requirement, which includes $ 15 million of new gross cash proceeds to be injected into the parent company, of which $ 12 million cash proceeds would be further injected into the bond issuer as equity.
The proposal includes certain amendments of the bond terms, including the extension of the maturity date from September 2022 to March 2023.
The management believes the cash inflow would create a stable runway for at least the next 18 months, thus enabling the issuer to preserve its asset values.
Based on its current projections, the company expects to see liquidity shortfall already in July 2020, resulting not only in covenant breaches but also operational liquidity issues.
“In the absence of an adequate restructuring of the parent and the issuer, as required, it cannot be excluded that the Issuer and the parent will have to execute fire-sales of vessels and/or file for bankruptcy with adverse effect for all stakeholders,” the summons further reads.