Greek boxship owner Nikolas Pateras has proposed to buy 19 vessels in the fleet of MPC Container Ships (MPCC), a German company under financial restructuring, TradeWinds is told.
The proposal by Pateras company Contships Management applies to the part of the MPCC fleet that was financed with the help of $200m worth of high-yield bonds maturing in September 2022.
MPCC has funded 39 of its 68 vessels through these bonds.
TradeWinds understands that Pateras is interested in the bond-financed MPCC vessels that match his own fleet of 40 feeder containerships with capacity of between 900 teu and 1,400 teu
MPCC has 20 ships in that size range. According to VesselsValue, they have a combined current market value of nearly $64m.
One vessel, the 1,024-teu AS Lauretta (built 2008), is excluded as it is already subject to sales negotiation with a Far Eastern owner, it is believed.
Contships is thought to have first approached MPCC over a possible deal in March this year.
The current offer price is thought to be slightly over $60m, based on recent resale deal prices of sisterships which are reflected in the $174m valuation of the entire fleet by VesselsValue as quoted in MPCC's own restructuring documents.
Contacted by TradeWinds, a Contships manager declined to directly comment on whether an offer was made, but said the MPCC vessels in question were indeed a good fit to his company's own. “We think there can be lots of synergies,” the manager said.
A senior MPCC official, by contrast, downplayed any talk of a bid. "We get a lot of silly offers all the time. There’s certainly nothing serious out there,” he said.
Pateras' proposal goes beyond the limited ship sales MPCC currently envisages as part of the financial restructuring it is pursuing. The Oslo-listed company has said it plans to raise just $7m through measures such as asset disposals.
Falling charter rates in the wake of the coronavirus crisis have pushed MPCC into a corner. The company has warned it "will experience [a] liquidity shortfall already in July 2020, resulting not only in covenant breaches but also operational liquidity issues".
MPCC plans to overcome its problems through a host of financial measures. It has called extraordinary shareholder and bondholder meetings in early July to obtain approval to proceed with a share-convertible loan, a capital increase, a 10-to-1 reversible stock split, as well as an easing of debt covenants and maturities.
Of particular urgency is the raising of $15m through a share sale to avoid a "fire sale" of ships, the company has said.
MPCC expects these combined measures will give it enough cash for 18 months of operations.
Pateras, who first publicly expressed his interest in the MPCC ships at the end of last week, set up Contships from scratch in 2014. What began as a moderate bet on the feeder containership market has developed into a high-stakes game, in which the Greek owner is estimated to have invested about $260m as of the end of last year — about half in debt and half in equity.
Pateras is familiar with the German containership market, having acquired several of his vessels by raiding the local KG (limited partnership) market for bargains.
Deal viewed as unlikely
Fearnley Securities said it viewed the move as "highly unlikely" as a deal at "price-talk" levels would not free any equity.
"In fact it would not cover the debt attached to the vessels," its analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said.
The investment bank believes MPCC's restructuring plan to add equity and amend bonds is a "much better way to preserve value".
Regarding Pateras' previous KG raids, Fearnley Securities added: "This is a very different situation though. KG assets [are] typically distressed ships managed by the banks as equity has been wiped out. Therefore, it is highly unlikely that MPCC would entertain these proposals, especially considering that ‘price talk’ is far below last done levels."
Priced below debt levels
The value of the MPCC vessels is "just 20% below scrap value, which seems harsh considering the vessels are 13 years on average and are typically operated for twice as long," the analysts said.
Other market sources suggest Contships' offer is in fact around 50% over current scrap prices.
"Importantly, a sale at these prices would not realise any liquidity in MPCC as the debt per vessel would be higher than the sales price.
Fearnley Securities, which is not one of the banks retained to raise capital for MPCC, added that it is difficult to assess the value of containerships in today's market, as just 20 ships have been sold this year when usually some 115 vessels are sold in a year.
"With charter-rates now finding a floor, the pressure on asset values will probably ease as well, suggesting that this is not the time to sell. On our estimates MPCC is priced circa 40% below on implied basis, near the all-time low values we saw back in 2016," the analysts said.
