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Finance Finesse

Marine Shippers Aim to Stay Afloat

Excel Maritime and Seanergy Maritime are working towards restructuring their loans

Two marine transportation companies - Excel Maritime Carriers Inc. (NYSE: EXM) and Seanergy Maritime Holdings Corp. (Nasdaq: SHIP) - are working to restructure loans after facing a drop in shipping rates caused by vessel oversupply. Many vessel operating companies have struggled and sought bankruptcy protection, including Overseas Shipholding Group Inc., General Maritime Corp. and Britannia Bulk Holdings Inc.

Excel Maritime, a shipping company based in Athens, Greece, entered into discussions with its lenders to extend a loan's maturity. While the discussions are under way, the lenders have agreed to a forbearance period, the company said in filings with the U.S. Securities and Exchange Commission.

Athens-based shipping operation Seanergy was in similar discussions with its lenders, and in an April filing with the SEC,said it had reached agreements with three of its five lenders. The company has spent the past year selling off vessels to pay down its debt to about $173 million.

"If you're a lender and you're coming up on the maturity date, then you've got to consider your range of alternatives," says Madlyn Primoff, a bankruptcy partner at New York law firm Kaye Scholer. The European-based specialty lenders that are generally involved in these deals are have little interest in taking over the vessel operations, experts agree.

"The last thing you want is for your borrower to give you the ships - it's expensive to maintain them," says F. Duffield Meyercord of Carl Marks Advisory Group LLC. These lenders need to consider if there is another party that would be willing to buy them out, or if not, decide if they want to extend the loans or enforce remedies.

"Because of the size of capital commitments involved in lending to vessels, it's an interesting negotiation that takes place. Lenders are usually willing to get to the table and are more patient at working it out," Meyercord says.

There have been situations where the debt has traded at a discount, creating room for hedge funds and private equity funds to "rightsize the capital structure," Primoff says.

Distressed debt investor Wilbur Ross has said he is raising a private equity fund to buy distressed shipping companies. Ross, through WL Ross & Co. LLC, was one of several PE investors who helped fund Greenwich, Conn.-based Diamond S Shipping's purchase of 30 tankers and charters in 2011.

Both Excel Maritime and Seanergy said in SEC filings that they experienced revenue declines in 2012 caused by lower rates and vessel oversupply, which happened because so many new vessels were built during the financial crisis. For these companies, it simply comes down to a situation where there is just too much supply to meet the level of demand.


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