An expanded refinancing plan will remove MPC Container Ships' (MPCC) reliance on improving charter rates, analysts have said, as bondholders approved the deal.
The Oslo-listed feedership owner came out on Thursday with a new offering to bondholders that will generate an extra $15m of liquidity as the company seeks to avoid bankruptcy and head off a bondholder revolt.
MPCC had initially been hoping to raise $15m through a share sale that would prevent it launching a "fire sale" of ships.
The move was also designed to avoid covenant breaches and liquidity issues.
But the company has now said it will add in $27.5m of new common equity, of which $20m will be injected into MPCC. This makes the overall plan worth $42m.
Vote goes for MPCC
Bondholders voted on Friday 77% in favour of the new plan, meeting the two-thirds threshold for approval
Chief executive Constantin Baack said the result confirmed the "strong support shown by the bondholders."
"The bond amendments are an integral part of safeguarding values for our stakeholders and ensuring operational stability during and following the Covid-19 pandemic for MPC Container Ships, our employees and crew serving on board our vessels," he added.
The next step is to carry out the the private equity placement.
MPCC has summoned an extraordinary general meeting for 13 July to okay the move.
The revised offer came after reports that US bondholder Cohanzick Management had put forward an alternative plan where founder David Sherman's company would be willing to guarantee a capital increase of $30m.
Sherman viewed the original scheme as favouring shareholders over bondholders, who will meet on Friday.
Better for bondholders?
Fearnley Securities assessed the first plan as balanced and sufficient to create a viable financial runway
But the Norwegian investment bank said it rested on a "gradually improving market balance" in 2021 and 2022.
"The revised proposal largely removes any dependence on improved charter rates by adding up to $42m of new liquidity versus $27m in the original proposal," the outfit said.
"We find the proposal increasingly constructive from a bondholder’s perspective, as the positives we highlighted in the first proposal are further improved: reduced liquidity uncertainty, runway allowing the bonds to be refinanced and strong shareholder commitments."
The new plan could see up to $12m paid in kind with new bonds to bondholders instead of interest, a $2.5m temporary release of restricted cash and a six-month maturity extension.
Container volumes are down 15% to 20% in the second quarter, Fearnley analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby, Gustaf Amle and Ulrik Mannhart said.
Tonnage owners taking a hit
"Carriers have blanked unprecedented amounts of sailings, and with time charter-in portfolios having remarkably low durations, the tonnage providers are taking the largest hit," they said.
The idle fleet is now nearly 12% of total capacity, according to Fearnley.
"We expect volumes to decline by about 10% in 2020, suggesting a rebound in the third quarter, albeit still negative year-on-year, whilst Q4 should be on par," the analysts said. "Unfortunately, it also suggests that charter rates will remain weak throughout 2020."
MPCC responded to Cohanzick's demand that the offer be pulled by accusing the fund manager of seeking to "exploit" the post-Covid 19 recovery of the company.
