OSLO-LISTED German container line MPC Containers Ships is seeking approval from its bondholders and lenders for a recapitalisation plan designed to improve liquidity and provide the company time to optimise its fleet and position for an anticipated market recovery following the coronavirus outbreak.
The company, which operates 68 feeder container ships ranging between 1,000 and 3,000 TEU, said that it needs the approval of the plan or that it might be forced into bankruptcy and the sale of its assets.
MPC Containers Ships said it has experienced a sharp delcine in cargo volumes due to the ongoing Covid-19 pandemic which is expected to continue to have a signifcant negative impact on the company.
Idle container ship capacity they estimated in their filing to the bondholders has increased by approximately 6 per cent at the end of 2019 to more than 11 per cent in mid-May and feeder charter rates are down 26 per cent and continue to decline.
The restructuring and recapitalisation plan is designed to strengthen the company's balance sheet and bridge the short-term liquidity requirements. The key components include US$15 million in new cash equity plus additional cash equity from any subsequent repair issue. The company is also seeking amendments for its bonds, including waivers, extended maturity, and payment-in-kind interests, reports The Maritime Executive, Fort Lauderdale, Florida.
Without these actions, the company warns that the market situation is expected to adversely impact its ability to be in compliance with financial covenants in its bonds and other financial arrangements. Based on current financial forecasts the company projects it will breach its minimum liquidity covenant in July and face an operational liquidity shortfall.
MPC Container Ships commenced operations in April 2017 and has since grown into one of the largest owners of container feeder vessels with an estimated 15 per cent market share. Its feeder services support the primary shipping services by connecting ports on intercontinental shipping lanes with one or more smaller ports, which are not serviced by the main line vessels. MPC Container Ships' vessels are chartered out on time charter contracts to global liner shipping companies and regional carriers.
In May, the company reported a net loss of nearly $11 million on operating revenues of $46 million. Commented at the time, CEO Constantin Baack said: "The rapid spread of Covid-19, the preventative measures imposed in various countries to counter the pandemic and the inevitable impacts on containerised trade of goods have led economic conditions to deteriorate significantly compared with our expectations at the end of 2019. The severity and fluidity of the situation makes it challenging to anticipate the timing and shape of a recovery."