Two marine transportation companies - Excel Maritime Carriers Inc. (NYSE: EXM) and Seanergy Maritime Holdings Corp. (Nasdaq: SHIP) - are working to restructure loans after facing increased competition and a drop in shipping rates caused by vessel oversupply.
Many vessel operating companies have struggled, including Overseas Shipholding Group Inc., which sought bankruptcy protection in November 2012, General Maritime Corp., which filed for bankruptcy in November 2011, Britannia Bulk PLC, which filed for administration in the U.K. in October 2008.
Excel Maritime, a shipping company based in Athens, entered into discussions with its lenders to extend a loan’s maturity. While the discussions are underway, the lenders have agreed to a forbearance period for the loan’s principal installments, the company said in SEC filings.
Athens-based shipping operation Seanergy was in similar discussions with its lenders, and in an April filing with the U.S. Securities and Exchange Commission said it had reached agreements with three out of five lenders. The company has spent the past year selling off various vessels in order 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, so there’s room for hedge funds and PE funds to step in and right size the capital structure,” Primoff says.
Those who have gotten involved include Oak Tree Management, Centerbridge and distressed debt investor Wilbur Ross, who has said he is raising a private equity fund to buy distressed shipping and other transportation companies.
Ross, through WL Ross & Co., was one of several PE investors who helped fund Greenwich, Conn.-based Diamond S Shipping’s purchase of 30 tankers and charters from Cido Shipping of Hong Kong. That deal, which garnered more than $1 billion in equity capital from PE investors, won Mergers & Acquisitions’ 2011 Deal of the Year award.
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, in part, because so many new vessels were built during the financial crisis.
For shipping companies, it simply comes down to a situation where there is just too much supply to meet the level of demand.
Distressed Company Watch
Other companies that have recently indicated doubt about continuing as going concerns in SEC filings include:
*ACL Semiconductors Inc., a company that manufactures dynamic random access memory products for computers, digital cameras and other products
Affymax Inc., a pharmaceutical company that develops medication to treat patients with kidney disease and other illnesses
Alexza Pharmaceuticals Inc., a Mountain View, Calif.-based company that develops medications to treat biopolar disorder, migraines, pain, seizures and insomnia
*Alliqua Inc., a biomedical company that develops products for wound dressings, headquartered in New York
Alternet Systems, a provider of mobile security and mobile financial services out of its Miami headquarters
*Amincor Inc., a New York company that grows its subsidiaries through acquisitions
*Bluefly Inc., an online discount retail website headquartered in New York
*Bodisen Biotech Inc., a Chinese fertilizer company
*Boreal Water, a company, headquartered in Kiamesha Lake, N.Y., that makes private-label bottled water
*China Pediatric Pharmaceuticals Inc., a Xi’an, China-based company that makes pediatric medications for China
CorMedix Inc., a Bridgewater, N.J.-based specialty pharmaceutical company that makes products to treat cardiac, renal and infectious diseases
*Decision Diagnostics Corp., a Westlake Village, Calif., company that develops medical technology for use on mobile phones
Energy Future Holdings Corp., a Dallas-based energy company that focuses on serving the Texas market
*Enova Systems Inc., a company that develops electric vehicle and hybrid-electric vehicle technologies, based in Torrance, Calif.
Excel Maritime Carriers Inc., a shipping company that operates a fleet of dry-bulk vessels
GeoPetro Resources, a natural gas exploration and production company headquartered in San Francisco
*Giggles N Hugs, a restaurant chain with a play space for children
*Globalstar Inc., a Covington, La., company that builds and operates satellite-based telecommunications systems
*Grandparents.com Inc., a company that owns a website that provides content for grandparents
Greatmat Technology Corp., a company that produces engineered stone for construction projects
Hallwood Group, a holding company that operates Brookwood Companies Inc., a textile company that produces fabrics and other products
Hotel Outsource Management International Inc., a hotel services providers that operates computerized minibars and offers consulting services
*Leo Motors, a Korean company that manufactures electric vehicles
Omphalos Corp., a circuit board equipment supplier headquartered in China
*Powin Corp., a Tualatin, Ore.-based equipment manufacturing company
Plug Power Inc., a Latham, N.Y.-based developer of alternative energy batteries
Paid Inc., a company that provides creative services, including marketing and web development, headquartered in Westborough, Mass.
Pedevco Corp., an oil and gas production company based in Danville, Calif.
Proguard Acquisition Corp., a Fort Lauderdale, Fla.-based business-to-business wholesaler
Seanergy Maritime Holdings Corp., a company that owns and operates seven dry bulk carriers
*Start Scientific Inc., an oil exploration and drilling company headquartered in San Antonio, Texas
Tranzyme Inc., a late-stage biopharmaceutical company headquartered in Durham, N.C. that develops medication for chemotherapy-induced diarrhea and metabolic diseases
True Drinks Holdings Inc., an Irvine, Calif.-based company that makes beverages, which are free from artificial coloring
Velti plc, a mobile marketing and advertising company
Vuzix Corp., a video-eyewear company headquartered in Rochester N.Y.
You On Demand Holdings, a Boulder, Colo. company that provides video-on-demand services
Tune in next Tuesday for more restructuring coverage.
* New this week