Germany's MPC Container Ships (MPCC) has revealed details of an "urgent" new refinancing plan to boost liquidity and potentially save the company during the coronavirus downturn.
It is hoped a cash injection of $15m and amended bond terms can provide it with enough money to see it through the next 18 months and avoid "fire sales" of its ships.
It has summoned a meeting of bondholders for 3 July to change aspects of the $200m bond issued by subsidiary MPC Container Ships Invest.
"In the absence of an adequate restructuring, 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," it warned.
And it added: "A restructuring of the bonds is required as there is a requirement to strengthen the liquidity and an imminent risk of breaching financial covenants."
Running out of cash
The Oslo-listed shipowner, which has 68 feeder vessels, said it "will experience liquidity shortfall already in July 2020, resulting not only in covenant breaches but also operational liquidity issues."
It admitted the minimum liquidity covenant could be breached next month. It is asking for a temporary waiver.
The company had already revealed talks with creditors and shareholders to strengthen the balance sheet in the downturn.
The MPCC parent itself had just $2m of cash on 30 June.
But the company told TradeWinds that its four subsidiaries and various shipowning entities each have more liquidity available, with the MPCC group’s accumulated cash position far exceeding the $2m estimate for the parent.
Share sale planned
The $15m of new money will be raised in a share sale. A total of $12m will be pumped into the subsidiary as equity and the rest will be used for general corporate purposes.
An additional amount up to $1.5m will be raised in a potential repair offering.
There will also be up to $7m in asset sales or payments in kind to bondholders in the form of new bonds.
MPCC said: "The ongoing Covid-19 pandemic has had, and is expected to continue to have, significant negative impact on the global economy and container shipping industry, leading to sharply reduced cargo volumes."
Idle containership capacity has increased from 6 at the end of 2019 to 11.5% mid-May, and feeder charter rates continue to trend lower, with rates for 2,000-teu vessels currently at $6,900 per day, down 26% from earlier this year.
Sale and purchase market closed
"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," MPCC added.
The group said it has comfortable covenant headroom in its remaining two financing arrangements.
Bondholders are being asked to extend the maturity date from 22 September 2022 to 22 March 2023.
The interest rate will be boosted to 6.25%.
The shipowner has taken on DNB Markets and Pareto Securities as financial advisers.
Legal battle looming
MPCC has previously said its financial position has also been affected after the failure of a deal sell the 1,024-teu vessels, AS Leona and AS Lauretta (both built 2008).
The vessels were reported sold in February for $6.5m each to an Asian operator.
MPCC said the buyer has " not fulfilled its legal commitments in the contract".
The company added it was taking legal action for any loss on the cancellation of the contracts. In the meantime, the AS Leona has since been sold to another buyer.
It reported a net loss of $10.7m for the three-month period ended 31 March, compared with a $7.7m a year earlier.
MPCC is the second feeder boxship owner to warn of covenant breaches.
At the end of April, Arne Blystad-backed Songa Container said it faced a potential breach of a bond covenant as it warned of charterer "distress" in the coronavirus crisis.
