Rickmers Trust Management Suspends Distributions

Singapore-based Rickmers Trust Management Pte. Ltd. (RTM), the Trustee-Manager of Mainboard-listed Rickmers Maritime, reported charter revenue of USD 27.4 million and net profit of USD 9 million in the third quarter of 2015, down by 17 and 14 percent respectively when compared to 2014.

The lower revenue is attributed mainly to lower market charter rates of seven vessels which commenced new charters over the course of the year.

“The slowdown in the charter market has direct impact on the Trust’s business. As a result, the Trust has taken the prudent step to suspend its distributions to conserve cash flow until charter conditions improve,” the Trust said announcing the results.

“It is a difficult decision to suspend distributions. We have been working hard to maintain distributions. In fact, we have been paying out distribution per unit of 0.6 US cents every quarter since 4Q2010. However, given the downturn in the charter market heading into 2016 and the uncertainty over how long this could persist, we have made the difficult decision to suspend distributions.

By doing so, our goal is to be better positioned for growth when the shipping market improves. We will review our decision on distributions every quarter, with the aim to resume distributions when we are confident that the Trust is in a position to do so sustainably,” said Soeren Andersen, Chief Executive Officer of RTM.

As informed, the Trust’s fleet of 16 containerships achieving close to full utilisation rate at 99.9%.

During the quarter, three vessels commenced new charters – CMA CGM extended the charters for ANL Warrain at a net daily charter rate of USD 13,028, as well as CMA CGM Jade and CMA CGM Onyx at a net daily charter rate of USD12,497. While the Trust’s fleet is currently fully chartered and is 97% employed for 2015, 11 of its vessels will trade in the spot market in 2016. Through its existing charter contracts, Rickmers Maritime has secured revenue of US$163.3 million between 30 September 2015 and the expiry of the last charter party contract in 2019.

“The expiry of long-term contracts means that the charter rates are adjusted to spot market levels when they expire. We have put these vessels out on short-term charters at present, in order to be able to fix them later for longer periods when the market improves. The charter market has declined significantly in the past few months and our priority now is to keep our vessels employed and sustain fleet performance. So far, we have managed to re-charter our contracts with minimal idle time, but we need to take prudent steps to conserve cash to weather further volatility in the shipping market,” Andersen commented.

According to Clarksons Research Services, global container trade is expected to grow by 3.7% while container vessel capacity is expected to increase by 7.1% in 2015. This oversupply, as well as the impact of ‘cascading’ and modest trade volumes across freight routes, is placing pressure on the charter market. The depressed time charter rates for container panamax vessels are expected to continue into 2016.

“Our growth plans remain intact. We still want to expand our fleet, and as a Trust, we actively evaluate acquisition opportunities. However, in the interim, cash conservation initiatives like the temporary suspension of distributions will help strengthen our balance sheet and better position us to pursue attractive opportunities as they arise. We believe that there will be promising prospects over the medium-to long-term as our vessels will be needed to serve as feeders for the world’s growing fleet of ultra large container vessels that call only at a few major hub ports,” Andersen added.

The Trustee-Manager said it was also in discussion with its lenders to extend the Trust’s value-to-loan covenant waiver, which is expiring on 31 December 2015.

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