Canada’s Seaspan Corp is offering bondholders cash to avoid having to buy back its $300m series due in 2026.
The world’s largest container ship tonnage provider has called a meeting of investors in the 6.5% tranche to amend the terms as part of its takeover by existing owners including Fairfax Financial Holdings and the Washington family.
The company, part of US-listed Atlas Corp, wants to remove the de-listing clause on the bond.
This clause would be triggered by the $10.9bn deal to take the company private, and would give bondholders a put option at 1% above par.
Seaspan is offering to pay an upfront fee of 8% to avoid this possibility.
The bond is now trading around 99% of par, according to Fearnley Securities.
This implies a substantially lower credit spread than both peers and its own 5.5% 2029 US bond.
The tight pricing is explained by investors expecting bondholders to have the put option available in the first half of 2023.
Fearnley Securities said the compensation is “meaningful,” however, and the estimated yield is 9.7% when the fee is included.
“On a relative basis, we find 9.7% yield highly attractive as we see very low default risk for Seaspan until maturity in 2026, especially on the back of the expected take-private deal, and limited opportunities to redeploy put proceeds with comparable risk/reward,” analysts Oystein Vaagen and Ulrik Mannhart said.
Big majority required
Seaspan needs two-thirds of holders to vote in favour of the change.
The vote does not apply to the $200m 2024 bond.
Parent Atlas has agreed to accept an all-cash takeover offer at $15.5 per share in a move expected to see the stock delisted from the New York Stock Exchange next year.
The deal places the company in the hands of Poseidon Acquisition Corp, an entity formed by certain affiliates of Fairfax Financial Holdings, the Washington Family and Atlas chairman David Sokol.
The majority shareholders, who already hold 68% of the Atlas stock, will now acquire outstanding shares they do not already own.
Ocean Network Express (ONE), the Singapore-based container ship operation of Japan’s Mitsui OSK Lines, NYK Line and K Line, is also participating in the bid.
