Rickmers Maritime

Cargo Ship

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1) General
2) Business and Strategy
3) Distributions
4) Charters and Operations
5) Financing
6) Industry

1) General

a) When was Rickmers Maritime listed?

Rickmers Maritime was listed on the Mainboard of the Singapore Exchange on 4 May 2007.

b) When is Rickmers Maritime's financial year end?

Rickmers Maritime's financial year end is 31 December.

c) How can I obtain a copy of the Annual Report?

The soft copy of the annual report can be downloaded from our website under the "Investor Relations" page.

d) Can I visit any of Rickmers Maritime's vessels?

Yes, we conduct regular visits to our vessels. The exact dates of the visits depend on when our vessels come into port. You can participate in one of these visits by emailing us at: ir@rickmers-maritime.com.

e) What is Rickmers Maritime's corporate structure?

Rickmers Maritime is managed by Rickmers Trust Management Pte. Ltd., the Trustee-Manager. The Sponsor of Rickmers Maritime is the Rickmers Group, which is founded and controlled by Mr Bertram R. C. Rickmers, whose family has been in the shipping industry for more than 180 years.

A detailed corporate structure of Rickmers Maritime can be found on this webpage: http://www.rickmers-maritime.com/structure.html.

f) What is the role of the Trustee-Manager?

The Trustee-Manager of Rickmers Maritime (the Trust) has dual responsibility of managing the business of the Trust as well as safeguarding the interests of the unitholders. In managing the Trust, the Trustee-Manager is responsible for formulating and implementing investment and financing strategies, asset acquisition and disposal policies, and carrying out the overall daily management of the Trust.

g) What are the Trustee-Manager's fees?

The Trustee-Manager was paid US$2.9 million in FY2015, comprising a base fee of about US$2.0 million and a variable fee equivalent to 0.9% of net charter revenue. The base fee is subject to an increase of 3% each year or the average monthly Consumer Price Index ("CPI") for the 12 calendar months immediately preceding the date of the increase, whichever is greater. In addition, to align the Trustee-Manager's interest with that of the unitholders, an incentive payment will be made in the event that the distribution per unit (DPU) exceeds specified target levels.

h) What is the total number of issued units?

The total number of issued units is 879,622,717.

i) Does Rickmers Maritime enjoy any tax incentives?

Rickmers Maritime has been awarded the MSI-Maritime Leasing status under Singapore's Maritime Sector Incentive ("MSI") Scheme for a period of 10 years, beginning 4 May 2007. Under the MSI Scheme, the Trust's charter income is tax-exempt.

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2) Business and Strategy

a) What is Rickmers Maritime's business strategy?

Rickmers Maritime is a business trust that owns and operates containerships of at least 3,450 TEU that are leased out on fixed-rate time charters to leading container liner companies.

The shipping market is volatile, and we have to strike a balance between minimising costs through this extremely adverse time by decommissioning vessels, and at the same time keeping some vessels active in the spot market for the flexibility to capitalise on any uptick in the market. The Trustee-Manager has decommissioned five vessels in August and September 2016. This will help to significantly reduce operating costs, and preserve cash as current spot rates are insufficient to cover expenses, and this is exacerbated by increased idle time. By decommissioning the vessels, we put a cap on our costs, which is kept at a bare minimum. When a vessel idles, Rickmers Maritime assumes bunker costs which are otherwise paid by charterers if the vessel is chartered. By laying up the vessels, we delay drydocks and other capex until the market recovers considerably. We proactively monitor fleet operating costs, and have implemented cost saving initiatives which are expected to reduce vessel operating expenses going forward.

We will also remain focused on refinancing our bank debt to ensure long-term solvency.

b) Would Rickmers Maritime consider acquiring vessels other than containerships, e.g. oil tankers or dry bulk carriers?

Our current focus is in the containership segment as we are confident about the long-term growth prospects of container shipping as it closely tracks world GDP growth. Over the past 20 years, container trade growth has outperformed most other segments and we believe that the long-term fundamentals of container shipping remain strong as it is the most cost-efficient means of transporting goods across long distances.

Notwithstanding the above, the Trust is open to exploring a diversification into other segments of the shipping industry that could enable it to grow in the longer term. However, these segments must have characteristics similar to the container shipping segment, such as long-term fixed-rate charters and a consolidated market where counterparty risks are minimised.

c) Who are Rickmers Maritime's customers?

Our customers include CMA CGM, Maersk Line, Mitsui O.S.K. Lines Ltd and Mediterranean Shipping Company. These are all leading liner companies, ranked among the top container liners in the world.

d) Why does Rickmers Maritime only acquire vessels from the Rickmers Group?

Rickmers Maritime does not limit itself to only acquiring vessels from the Rickmers Group. As long as the acquisitions are accretive, the Trust will consider acquiring vessels from all sources, including the second-hand market.

Where Rickmers Group is concerned, Rickmers Maritime has the Right of First Offer for any of its containerships above 3,450 TEU that are fixed for a period of one year or more.

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3) Distributions

a) What is the Trust's distribution policy?

The Trust has adopted a policy of making quarterly distributions to its unitholders from its operating cash flow. The Board will decide on the distribution quantum every quarter, after reviewing the Trust's financial performance and financing requirements.

b) What percentage of its income does the Trust pay out?

The Trust does not have a target payout ratio. The Board will decide on the distribution quantum every quarter, after reviewing the Trust's performance, financial position and funding requirements.

c) Why were distributions suspended from 3Q2015?

The slowdown in the charter market has direct impact on the Trust's business due to its exposure to the spot market. As a result, the Trustee-Manager has taken the difficult but prudent step to suspend distributions to conserve cash until charter conditions improve. To further conserve cash, the Trustee-Manager has decommissioned five vessels in August and September 2016 to significantly reduce operating costs as current spot rates are insufficient to cover expenses, and this is exacerbated by increased idle time.

d) When will the distributions be resumed?

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.

e) How can I find out the distribution quantum that I will receive for a particular quarter?

Information on quarterly distributions declared by the Board will be included in paragraph 11 of the unaudited financial statements and distribution announcement for the particular quarter. In addition, unitholders will also receive a notice which contains details on the amount of DPU, the ex-Distribution trading date, the Books Closure Date and the Distribution Payment Date. This notice is also posted on the SGXNet and Rickmers Maritime's website (under Newsroom).

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4) Charters and Operations

a) What are the daily charter rates like?

Please refer to the graph on http://www.rickmers-maritime.com/timeline.html

b)When do the vessels' charter agreements expire?

Our vessels are due for redelivery between 2016 and 2019. Through its existing charter contracts, the Trust has US$97.7 million of secured revenue between 30 September 2016 and the expiry of the last charter party contract in 2019.

c) What is the difference between bareboat and time charter?

Vessels on bareboat charter are chartered out "as is", meaning that the ship's operating, voyage and maintenance expenses (including crewing) will be borne by the charterer. In the case of a time charter, the shipowner is responsible for paying the vessel's operating and maintenance expenses including crewing and insurance. However, voyage expenses including bunker fuel, port expenses and cargo operation costs are to be borne by the charterer. The majority of containership chartering is undertaken on time charter basis.

d) What kind of charter(s) does Rickmers Maritime offer?

Our vessels are leased out on fixed-rate time charters. While we are also able to offer bareboat charter, our preference is to lease our vessels out on time charters as this allows the Trust to add value and have better control over the condition of the fleet.

e) How does high fuel cost impact the financial performance of Rickmers Maritime?

Fluctuating fuel prices do not have a significant impact on the Rickmers Maritime as the cost of bunker fuel is borne by the charterer. Under time charter arrangements, the Trust is responsible only for lubricant oil, the consumption of which is significantly less than bunker fuel oil. Historically, the price of lubricant oil is also less volatile than bunker fuel oil.

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5) Financing

a) What is the target gearing ratio of the Trust?

We have a long-term target debt-to-equity ratio of 50:50. However, our actual gearing level is largely driven by our funding needs, the cost and the availability of funds from the debt and equity markets.

b) What are the covenants attached to Rickmers Maritime's loans?

The main covenants include Value-to-Loan (VTL) ratio, interest coverage, minimum liquidity and unitholders' equity.

c) What is the Value-to-Loan (VTL) covenant?

Value-to-loan is a common covenant in asset financing. When a bank makes a loan for the acquisition of a particular asset, the loan outstanding sum is restricted and tied to the valuation of the asset which is mortgaged to bank.

d) How much interest does Rickmers Maritime pay for its loans?

The interest rate on all Rickmers Maritime's bank loans is 175 basis points plus 3-month US$ LIBOR.

e) How are you progressing with the refinancing initiatives, in particular, the US$179.7 million maturing on 31 March 2017?

The Trust has received a firm offer letter from the senior lenders of the HSH syndicate (comprising HSH Nordbank AG, Singapore Branch and DBS Bank Ltd) in relation to a restructured secured amortizing term loan facility of an amount of up to US$260,227,745.26 ("New Facility"), to refinance all of the Trust's present outstanding debt under the existing facilities granted by the lenders of the HSH syndicate and BNP syndicate (comprising BNP Paribas, ING Bank NV, Singapore Branch, The Bank of Nova Scotia Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Sumitomo Mitsui Trust Bank Limited, Singapore Branch).

The New Facility, if successfully entered into, would extend the maturities of a large part of the Trust's secured bank debts to the first quarter of 2021, and include a moratorium on principal repayments under the existing facilities to the fourth quarter of 2016, amongst other terms and conditions. The New Facility is conditional on, amongst others, further credit approvals, entry into loan and security documentation, waivers and/or consents from the existing syndicate lenders and a successful restructuring of the Notes. The Trust has already received certain waivers from the lenders of the HSH syndicate and the BNP syndicate and is procuring extensions of certain waivers granted by the lenders of the BNP syndicate whilst the New Facility is being implemented by the respective lenders thereto. The Trust is also in negotiations with one of its senior lenders in relation to agreeing terms of a debt settlement agreement. The Trustee-Manager is actively engaged with all of its bank lenders on the above comprehensive refinancing plan which, if achieved, will result in a unified credit facility, in line with the Trust's balance sheet optimisation efforts to reduce amortisation, increase loan tenures and improve long-term solvency. The refinancing plan, while containing certain restrictions, should allow the Trust an optimized debt structure and with sufficient time to manage its liabilities and growth in the present adverse industry conditions.

f) How does the exit from the Intercreditor Deed benefit Rickmers Maritime?

In November 2015, Rickmers Maritime announced its exit from the Intercreditor Deed after five years. The exit allows the Trustee-Manager to more effectively engage each of its three lending syndicates on a bilateral basis, without having to seek unanimous agreement from all syndicates. Several financial constraints, including the first right to cash inflows from equity fund raisings, have also been lifted with the exit.

g) Does the exit from the Intercreditor Deed mean that the Trust is no longer required to meet the VTL covenant? If not, what are the VTL ratios in the loan agreements?

Details of the VTL ratios for the various loan facilities are as follows:

Loan Facility
VTL Requirement in Loan Facility

IPO Facility

VTL covenant for the IPO Facility has been waived with effect from Nov 2015.
First Facility 110%
Second Facility 110%

 

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6) Industry

a) What is the outlook for the container shipping industry?

The significant imbalance between supply and demand has caused the charter market for all container vessels to deteriorate significantly towards to last quarter 2015, as container lines took the consequence of weak demand growth to shut down services and redeliver chartered vessels to shipowners. According to Clarksons Research Service, container trade growth was 2.4% while container fleet was by 8.1% in 2015. The depressed container shipping market persisted into 2016. Demand remained weak and tonnage overhang continued to weigh on charter rates. Global container trade is expected to grow by 3.8% while container fleet growth is expected to tighten to 3.0% in 2016. Stronger trade growth and higher scrapping activities in 2016 could help to improve freight earnings.

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