Preferred Ship Mortgage on Vessel Under Construction
The U.S. Court of Appeals for the Fifth Circuit ruled that a preferred ship mortgage may be recorded before a vessel’s construction is completed. In the instant case, the mortgage was recorded with the U.S. Coast Guard on July 27, 1999. The ship completed its sea trials and was delivered on August 18, 1999. The owner later defaulted on the mortgage and other debts. The U.S. Maritime Administration (MARAD) asserted that its preferred ship mortgage took precedence over other claims. A classification society asserted that the mortgage was not entitled to status as a preferred ship mortgage because it was issued on a ship technically not in existence. The court held that the Ship Mortgage Act allows a preferred ship mortgage to be filed on a ship under construction. United States v.
Ultrapetrol Close Sale of US$25-million Notes Issue
Ultrapetrol (Bahamas) Limited an industrial transportation company serving marine transportation needs in three markets (River Business, Offshore Supply Business and Ocean Business), announced today the closing of its previously announced sale of $25 million in aggregate principal amount of its 8.875% First Preferred Ship Mortgage Notes due 2021 (the "Add-On Notes"), which were offered as an add-on to its outstanding $200 million aggregate principal amount of 8.875% First Preferred Ship Mortgage Notes due 2021. Ultrapetrol say that they plan to use the net proceeds of the offering for general corporate purposes. As a result of the offering of the Add-On Notes…
'Unreasonable Mistake' does not prevent Discharge of Debt
The U.S. Court of Appeals for the Fifth Circuit ruled that an unreasonable, but honest mistake by a debtor in obtaining a loan does not prevent the debt from being discharged in a subsequent bankruptcy. In the instant case, the debtor was corporate secretary and director of a shipowning company. The company executed a preferred ship mortgage on one of its ships in favor of a business with which it had a number of transactions. The debtor signed the authorizing resolution for the transaction. The company and the other business had various disputes that were eventually settled. Debtor apparently was under the impression (albeit mistaken) that the settlement extinguished the preferred ship mortgage. The company then negotiated a working capital loan with a credit corporation.
Attachment of Maritime Lien for Breach of Charter Party
A lesson in admiralty law was provided by the U.S. Court of Appeals for the Fifth Circuit when it ruled that a maritime lien for breach of a charter party attaches when the vessel is placed at the charterer's disposal. In the instant case, a vessel owner entered into a time charter and accordingly delivered the vessel. The vessel was then sold to a third party (subject to the time charter) and the new owner obtained a mortgage loan on the vessel. The bank providing the loan duly recorded its preferred ship mortgage. Soon thereafter, the new owner breached the time charter and then defaulted on the mortgage. Both the bank and the charterer sought to recoup their losses by having the vessel sold, but the proceeds were not expected to cover both claims.
Court Rules on Liens and Breaches
A Lesson in admiralty law was recently provided by the U.S. Court of Appeals for the Fifth Circuit when it ruled that a maritime lien for breach of a charter party attaches when the vessel is placed at the charterer's disposal. vessel owner entered into a time charter and accordingly delivered the vessel. The vessel was then sold to a third party, subject to the time charter, and the new owner obtained a mortgage loan on the vessel. The bank providing the loan duly recorded its preferred ship mortgage. "Soon thereafter, the new owner breached the time charter and then defaulted on the mortgage. Both the bank and the charterer sought to recoup their losses by having the vessel sold, but the proceeds were not expected to cover both claims.
Ultrapetrol Announces Redemption
Ultrapetrol (Bahamas) Limited, an industrial transportation company serving marine transportation needs in three markets (river business, offshore supply business and ocean business), has announced that on July 10, 2013 the company will redeem all $180 million of its outstanding 9% First Preferred Ship Mortgage Notes due 2014. The Depository Trust Company (DTC) was advised of the redemption on June 10, 2013. For more information, note holders can contact the paying agent M&T Bank/Wilmington Trust at firstname.lastname@example.org.
Navios Acquisition Proposes Private Offering
Navios Maritime Acquisition Corporation announced that the company and Navios Acquisition Finance (U.S.) Inc., its wholly owned finance subsidiary, intend to offer through a private placement, subject to market and other conditions, approximately $600 million of first priority ship mortgage notes due 2021. The notes will be offered and sold in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and in offshore transactions to non-United States persons in reliance on Regulation S under the Securities Act. The notes will be secured by first priority ship mortgages on 12 vessels aggregating approximately 2.6 million deadweight tons owned by certain subsidiary guarantors.
Ultrapetrol Details its Mortgage Note Offering
Following on from an earlier announcement of the US$200-million offering, Ultrapetrol now give provide greater detail. The company has priced the offering of $200 million in aggregate principal amount of its 8.875% First Preferred Ship Mortgage Notes due 2021 (the "Notes"). Notes and related guarantees will be secured by the stock of certain of the Company's subsidiaries and by first preferred mortgages on vessels owned by certain of its subsidiaries. The Notes will be issued at par and are being sold in a private offering within the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to certain other persons outside of the United States in reliance on Regulation S under the Securities Act.
Bankruptcy Trumps Admiralty
The U.S. Court of Appeals for the Second Circuit ruled that a bankruptcy court may extinguish maritime liens on vessels where the lienors are before the court, even though the ships are not within the jurisdiction of the court. A shipowner filed for reorganization under Chapter 11 of the Bankruptcy Code. Defendant financial institutions, which held preferred ship mortgages, succeeded in getting the court to convert the action into an involuntary bankruptcy under Chapter 7. Plaintiff lienors filed maritime lien claims and contended that the bankruptcy court lacked authority to extinguish liens on ships that were not within the jurisdiction of the court. The bankruptcy court offered plaintiffs the opportunity to withdraw from the proceeding.
Ultrapetrol Completes 100% of Mortgage Note Exchange
The company informs that the notes were issued for an equal principal amount of 8 7/8% First Preferred Ship Mortgage Notes due 2021, that are registered under the Securities Act of 1933, as amended and expired on January 24, 2014 at 5 p.m. Ultrapetrol add that as of the Expiration Time, holders of $25.0 million aggregate principal amount of the Notes have participated in the Exchange Offer, representing 100% percent of the Notes eligible for exchange. under a registration rights agreement entered into by and among the Company and the initial purchasers of the outstanding notes.
LISCR Welcomes Liberian Legislation
The Advisory Board of the Liberian International Ship & Corporate Registry (LISCR), at its inaugural meeting, held in conjunction with the Annual Conference of the Connecticut Maritime Association, in Stamford, Conn., has set a positive agenda designed to drive forward the Liberian Registry's goal of achieving excellence in standards of quality and service. In his address to the CMA's lunch, Board chairman Rex Harrington reported that the Board had welcomed a number of developments but had also addressed critical issues facing the industry. The Board has set itself and LISCR a timetable to monitor progress and to ensure that the Liberian Registry continues to be the industry leader.
Pegasus Shipping Completes High Yield Bond Restructuring
Pegasus Shipping (Hellas) Ltd. has completed the restructuring of its $150 million 11.8 percent First Preferred Ship Mortgage Notes with its Bond Holders. Under final terms of the deal, the basis of which was first agreed in the latter part of last year, the company bought back its bonds from Bond Holders at $0.50 for each bond and retains- full equity control of the fleet. The total value of the transaction is $75 million. The completed restructuring represents almost two years of negotiations between the company, its advisors American Marine Advisors and Chanin Capital Partners and the company's two major Bond Holders Lehman Brothers and MacKay Shields.
Navios Announces Delivery of Capesize Vessels
Navios Maritime Holdings Inc. (NYSE:NM), a global, vertically integrated seaborne shipping and logistics company, announced that the Capesize vessels Navios Phoenix and Navios Stellar were delivered from a Japanese and a South Korean shipyard respectively to Navios Holdings' owned fleet. The Navios Phoenix is a Capesize vessel of 180,242 dwt. She was delivered to Navios Holdings' fleet on December 21, 2009. Approximately $52.5m was used to finance the purchase from the escrow established under the 8 7/8% First Priority Ship Mortgage Notes. The Navios Stellar is a Capesize vessel of 169,001 dwt. She was delivered to Navios Holdings' fleet on December 23, 2009.
Pegasus Shipping Mulls Bond Restructuring
Panamax tanker specialist Pegasus Shipping is reportedly discussing restructuring its $150 million 1997 junk bond issue with noteholders. Officials said the company is using a 30-day grace period in relation to a coupon payment that was due on Nov. 15. Discussions also included proposals to capitalize on current market sector weakness and the introduction of new capital, officials said. Last week ratings agency Moody's downgraded Pegasus' senior secured debt rating on the company's 11.875 percent first preferred ship mortgage notes due 2004 to Ca from B3 on fears of a payment default. Company officials said that competitive conditions in the Panamax tanker markets exerted pressure on rates…
Navios Announces VLCC Delivery
Navios Maritime Acquisition Corporation, an owner and operator of tanker vessels, has announced that the Nave Electron, a 2002-built VLCC of 305,178 dwt, was delivered to Navios Acquisition's owned fleet on July 21, 2014. The company also announced that the Nave Electron has been chartered out to a high quality counterparty for minimum one year at a rate based on charterer's VLCC pool earnings. Impact on Navios Acquisition's 8.125% Secured Bond Due 2021 The Nave Electron has been provided as collateral under the 8.125% First Priority Ship Mortgage Notes due 2021, in place of the Nave Dorado and the Nave Lucida (MR2 product tankers). As a result, approximately $5.5 million of value has been added to the collateral package.
Moody's Downgrades Navigator Gas
Moody's Investors Service has downgraded the rating of Navigator Gas Transport's first priority ship mortgage notes due 2007 to Caa2 from Caa1, and the second priority notes due 2007 from Ca to C. The senior implied rating was reduced to Caa2 from the previous B3. The rating outlook is negative. The rating downgrade primarily reflects the reduction in earnings capacity of the ships due to the continued weak rate environment of the transport market for petrochemical gasses, the concurrent decline in the market value of the ships under construction (collateral for the notes), the fragility of the company's balance sheet due to the high leverage, and increasing expectations that restructuring options will likely be explored and effected with the bondholders.
GSL Announces New First Priority Secured Notes Offering
Global Ship Lease, Inc. (GSL) announced that it plans to issue an aggregate principal amount of up to $400,000,000 of first priority secured notes due 2021 in a private placement. The notes will be fully and unconditionally guaranteed, jointly and severally, on a senior basis by Global Ship Lease Services Limited and each of the company's 17 vessel-owning subsidiaries and in the future by certain of the company's existing and future restricted subsidiaries, as may be required by the terms of the indenture that will govern the notes. On the issue date, the notes will be secured by first priority ship mortgages on 17 vessels owned by certain subsidiary guarantors and certain other associated property and contract rights…
GSL Prices First Priority Secured Notes
Global Ship Lease, Inc. (GSL) announced that it has priced an offering of $420,000,000 aggregate principal amount of 10.000% first priority secured notes due 2019 at an issue price of 98.5% in a private placement. The notes will be fully and unconditionally guaranteed, jointly and severally, on a senior basis by Global Ship Lease Services Limited and each of the company's 17 vessel-owning subsidiaries and in the future by certain of the company's existing and future restricted subsidiaries, as may be required by the terms of the indenture that will govern the notes. On the issue date, the notes will be secured by first priority ship mortgages on 17 vessels owned by certain subsidiary guarantors and certain other associated property…
Finance: Love on the Rocks
Ain’t love grand? There’s the courtship phase: the wine, the roses, the proposal; the blood tests come back approved by the credit committee . . . finally the borrower and the lender fund the deal and tie the knot forever, walking off into the sunset in vessel finance ecstasy. Or, so the happy ending should go. But for some, there will be a time when the relationship with their vessel’s lender hits the proverbial rocks. The relationship might, in certain circumstances be salvageable, but in others, it will end in an abandoned ship . . . foreclosure. More often than not, this breakup is usually caused by the borrower’s failure to pay as agreed due to any number of financial or other misfortunes that may have befallen him (or her).
Lack of Ship Definition is a Threat to Investors
AKD says the lack of an unambiguous term to describe a ‘ship’ in several jurisdictions represents a potential threat to asset security for financiers, particularly in the offshore and renewable energy sectors. AKD partner Haco van der Houven van Oordt says, “In many jurisdictions, including the US and the UK, there appears to be no clear definition of a ship. A recent Tulane Maritime Law Journal study illustrated how a variety of floating objects which have no means of propulsion and/or ability to carry cargo or passengers cannot easily be registered as a ship.
Useless Judgment Doctrine Moots Appeal
The U.S. Court of Appeals for the Fifth Circuit ruled that, under the useless judgment doctrine, it lacked jurisdiction to consider an appeal. In the instant case, plaintiff ship manager operated a ship for the owner. The ship was subject to a preferred ship mortgage and also subject to various liens held by suppliers of necessaries. When the owner did not pay as promised, plaintiff filed an in rem claim and had the ship arrested. The other claimants also filed their claims. The ship sale did not bring sufficient monies to pay all the claims. Following a hearing, the court denied various claims asserted by plaintiff and then ranked the various claims such that the monies were dissipated before plaintiff’s claim arose. The court then directed that the claims be paid in rank order.
Cammell Laird Close To Luxus Cruise Ship Contract
Cammell Laird Holdings, which has been a strong shipbuilding and repair success story for several years, announced that it was to build two cruise ships, breathing further life into the struggling U.K. shipbuilding industry. Cammell Laird, however, said the contract with Luxus (UK) Ltd. for two 28,000-ton ships was conditional on the go-ahead from the UK government and Shipbuilding Intervention Funding, as well as ship mortgage finance guarantees to Luxus's bankers. The deal could be worth a reported $497.9 million, with the work expected to be shared between Merseyside in the northwest, Teeside and Tyneside in the northeast and Gosport on the south coast. Cammell Laird lost out last month on orders for six army roll-on roll-off transport ships.
Moore Stephens: Russia a Good Place to do Business
Shipping accountant and business consultant Moore Stephens says that, despite recent publicity to the contrary, Russia is now a better place to do business than it has ever been for small and medium-size enterprises, including shipowners. Writing in the latest issue of The Bottom Line, the newsletter of the Moore Stephens shipping industry group, Gavin Stoddart, managing director of Moore Stephens Russia, says, "The door to international finance and international markets is open, with traffic flowing in both directions. The only passport to success is sound and visible financial structures". Acknowledging that there is still a Russian risk premium on investment capital…