South Korean ocean carrier Hanjin asked Seaspan and others for a reduction in existing charter rates for a period of three and a half years in exchange for securities in a restructured Hanjin.
Independent containership owner and manager Seaspan Corporation said in a filing with the U.S. Securities and Exchange Commission on Tuesday that it has rejected a request from South Korean ocean carrier Hanjin to reduce charter rates.
The filing was made in conjunction with Seaspan’s public offering of 5 million Class A common shares that were priced at $14.70 per share. Seaspan has granted the underwriters of the offering a 30-day option to purchase up to an additional 750,000 common shares. Seaspan intends to use approximately $85 million of the net proceeds from the public offering and the concurrent private sale to redeem a portion of its outstanding 9.50 percent Series C Cumulative
Redeemable Perpetual Preferred Shares and general corporate purposes. The company had already announced plans to redeem 5.6 million of the Series C shares in June.
“Our customer Hanjin Shipping Co. Ltd., or Hanjin, announced on May 4, 2016 that it is pursuing a voluntary restructuring arrangement with its lenders, led by state-owned Korea Development Bank, or KDB,” Seaspan said. “Hanjin charters three of our 10,000 TEU vessels and four of GCI’s 10,000 TEU vessels under 10-year charter contracts, with options to extend.” Greater China Intermodal Investments (GCI) is Seaspan’s investment
partnership established with an affiliate of the Carlyle Group and
others.
“The total contracted future revenue under our three charter contracts with Hanjin is approximately $375.8 million, excluding extension options,” Seaspan said. “Hanjin currently is making monthly payments under its charters with us, but, as of the date of this prospectus supplement, we have a total of approximately $11.6 million of accounts receivable relating to the charters, all of which is past due.”
Korea’s other major container shipping company, Hyundai, is also seeking a reduction in charter rates from shipowners. Seaspan does not count Hyundai as one of its customers.
Seaspan said Hanjin has asked it and other owners of containership vessels that Hanjin charters “for a reduction in existing charter rates for a period of three and one half years, in exchange for securities in a restructured Hanjin. We rejected this request, and neither Hanjin nor KDB can change the charter rates in the voluntary restructuring without our consent.”
The chart below, built using data from ocean carrier schedule and capacity database BlueWater Reporting, along with data from Seaspan, GCI Group and Danaos, shows a list of all Hanjin operated vessels currently on charter.
CLICK TO ENLARGE
In addition, Seaspan said “Hanjin may fail to continue to promptly make charter payments or may seek to terminate the charter contracts. A failure by Hanjin to continue to promptly make payments under the charter contracts, termination of the charter contracts or an insolvency or similar event involving Hanjin could result in a default under our financing agreements relating to our Hanjin vessels and permit the lenders to exercise available remedies. Hanjin’s failure to continue to make charter payments would also permit us to arrest the applicable vessels, terminate the charters and seek to recharter the vessels, and exercise other remedies under the charters and otherwise, which, we believe would further materially harm Hanjin’s business and restructuring efforts. It is uncertain at this time how the Hanjin restructuring may affect us and Hanjin’s obligations under its existing contracts with us. We have not taken any reserve or allowance in our financial statements when valuing the past due receivables.”
