Sea Containers Ltd. has announced that the company is completely quitting the ferry business, including its
SeaStreak commuter service between New York City and New Jersey, taking a $500 million charge and was in talks to amend some of its loan agreements.
Shares of the Bermuda-registered passenger transport and marine container leasing company fell as much as 29 percent after the announcement.
Sea Containers said it would restate its earnings for all four quarters of 2005 and delay filing its annual reports with the U.S. Securities and Exchange Commission until April to allow time to finalize bank negotiations and outstanding accounting issues.
Robert MacKenzie, Chief Executive Officer of Sea Containers since January, told analysts in a later conference call that the company's ferry business had "deteriorated significantly" in 2005 due to rising fuel costs and reduced demand.
He said "action must be taken" as the company had significant debts. Sea Containers aimed to sell off all its ferry businesses by the end of 2006. The funds raised would go toward reducing the company's debt.
The company has a total of 11 ferry vessels up for sale, MacKenzie said. He declined to say how much could be raised in a sale.
The decision to exit the ferry business was taken at a Monday meeting of its board, Sea Containers said.
The charges would reduce its net worth by $475 million. There would be a noncash impairment charge of $415 million on a pretax basis for the fourth quarter and a noncash pretax charge of $85 million for losses incurred during the sale of containers, impairment charges and a goodwill write-down.
Sea Containers said in November it had begun to restructure its ferry businesses and would consider offers to sell its Helsinki-based Silja Oy Ab ferry business. It said on Friday that the proposed Silja sale led company management to consider a complete exit from the ferry business.
Sea Containers raised around $300 million before expenses from the sale of its shares in Orient-Express Hotels Ltd. in November, MacKenzie said. Those proceeds will also go toward paying down debt.
Sea Containers is in arbitration with General Electric Capital Corp., a unit of General Electric Co. (NYSE:GE - News), over operations at joint venture GE Seaco, which leases a fleet of 1.2 million containers. A ruling on the arbitration is expected this year.
On Tuesday Sea Containers' said founder and chairman James Sherwood had resigned.