MEBA Pension Trust completes sale of FABC to P&O Nedlloyd
In a complicated transaction that required the U.S. Maritime Administration’s approval, the Marine Engineers’ Beneficial Association (MEBA) Pension Trust said it has completed the sale of its U.S.-flag vessel operation First American Bulk Carrier Corp. to P&O Nedlloyd.
MEBA formed the carrier operation in 1983 to take advantage of the Reagan-era “Section 615” program. The company used the program to build two U.S.-flag 2,400 TEU containerships in a South Korean shipyard. The vessels were delivered to First American Bulk Carrier Corp. (FABC) in 1985, and were time-chartered over the years to a number of companies.
In the mid-1990s, FABC enrolled its two vessels, then named the “Tillie Lykes” and “Tyson Lykes,” in the Maritime Security Program (MSP). The federal government program provided FABC with $2.1 million per ship to make them available on a moment’s notice to the U.S. military in times of war or national emergency.
In February 2000, FABC chartered the two ships, renamed the “Delaware Bay” and “Chesapeake Bay,” to Farrell Lines. In July 2000, Farrell Lines was bought by P&O Nedlloyd, and the two ships continued under time charters with P&O Nedlloyd’s Farrell Mediterranean Express service.
With congressional reauthorization of the MSP program, P&O Nedlloyd has sought to secure its place more firmly in the program. To legally acquire the FABC operation from the MEBA Pension Trust, P&O Nedlloyd created a new U.S. corporation called M-Holdings, which also formed the subsidiary M-Ships. After the sale was complete, M-Holdings and M-Ships became FABC Corp.
“As a result of these corporate steps, FABCC is now a standalone, U.S. citizen company. It does not own any ships, but instead is party to bareboat and time charter parties, just as FABCC was party to such arrangements when it was owned by the MEBA Pension Trust,” the union said in its Friday newsletter.
Through Farrell Lines subsidiary, P&O Nedlloyd acquired the two “Bay ships” from Fleet Bank. “P&O/Farrell then bareboat chartered the Bay ships to the new, standalone FABCC, which, in turn, time-chartered the vessels back to P&O/Farrell,” MEBA said.
Also as part of the deal, Marine Transport Lines will take over the management of the two vessels from Nicolas Bachko Co. of New York.