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MARINE MONEY WEEK June 23-25, 2009 The Art of Asset Recovery “Knowing when to Hold ‘em - Knowing when to Fold ‘em.” Presented by: Leonard J. Hoskinson General Manager, Ship Management Services Inc. Who is SMS ?. - PowerPoint PPT Presentation
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MARINE MONEY WEEKJune 23-25, 2009
The Art of Asset Recovery“Knowing when to Hold ‘em - Knowing when to Fold
‘em.” Presented by:
Leonard J. HoskinsonGeneral Manager, Ship Management Services Inc
Who is SMS ? A 100% subsidiary of Ultrapetrol – Ravenscroft manages
In-House vessels and SMS is the entity through which we manage all Third Party business
Ravenscroft and SMS share the same staff from our offices which are located in Coral Gables, Florida
We have a 20 year history managing ocean and river vessels in wet, dry, combination, offshore, general cargo and passenger ship sectors, for related and third parties
We assist Lenders with asset protection issues
Have this Info Ready Recent Vessel Inspection
Class Status Dry dock & Special Survey Status Repair & Maintenance Status Operational defects & limitations Overall Condition
Vessel Payables Priority Liens Including Crew Wages Bunkers Insurance Premium Overdue Class Fees
Loan Outstanding vs Current Market Value
Situation Summary In Default
Covenant and/or Payment Cross Default with other loans/ships
Co-operation from Client - Yes or No
Charter Details
Vessel Location
Current Voyage - Loaded/In Ballast
Commercial Evaluation e.g. Can current TC continue
Estimated Out of Pocket Expenses to be funded by the Bank including Repatriation Costs
Estimated Time for Arrest process
Re-Structure or Foreclose
Now you have much of the info you need to decide whether or not you are going to work this through with the Client or Foreclose
If Re-Structure - Congratulations and Good Luck!
If, after all things considered it’s Foreclose - each situation has its own plusses and minuses, get your Legal Counsel involved and call SMS
Hold - Are you prepared to bid-in the vessel at auction
Foreclose - Now What?
Fold or Hold
Fold - Are you prepared to let the vessel go to auction and let it go to the highest bidder at or above the Reserve price
Fold
Loan Loss
Cross Default Implications
Demolition
Hold
✓ Face the Market
✓ Commercial Evaluation is Positive
✓ Proactive towards next stage
✓ Bring in a Partner
✓ Line up a Back to Back transaction
Arrest - Jurisdiction
Avoid
Owner’s Backyard
South Africa (if more than one vessel in Fleet)
Any jurisdiction where “Necessaries” rank ahead of the Mortgage
Anywhere you do not have a sound and connected legal presence
Now the Real Work Begins
Appoint Partner’s Manager
Appoint Local Lawyer & Local Agents
Commence Arrest Process
Funding
Crew Pay-off and Repatriation
Mooring & Insurance arrangements
When Changing Crew…
Assume that base wages, overtime, leave wages and final contract will at the initial stage be 20% higher than expected
Current valid crew contracts may be difficult to locate and/or verify
Determine last wage payment details
Remove Owners crew as soon as possible
Make clear that the cash is available in order to calm nerves
Practical Observations Assume that the costs associated (excluding
legal/process fees) with a “good” arrest will be at least $500,000 per vessel:-
Crew pay-off and repatriation 56%
Fuel 15%
Replacement Crew 15%
All Other 7%
Port Risk Insurance 4%
Our Fees 3%
More Practical Observations
Keep the number of Bank “management days” to the very minimum;
Solutions need to be effected as soon as the auction process has been completed;
Otherwise as each day passes, the Bank’s expenses grow;
What the Experts Say “Managing Default is one of the aspects
of ship finance where practical skills are required” (1)
“Until the Global Economy stabilises and resumes its growth path there will continue to be an excess of ships of all types” (2)
“We will have an increasingly modern fleet with a significant part of it toiling away for earnings that fail to match capital costs” (2)
(1) Martin Stopford – Maritime Economics 3rd Edition Chapter 7.9 Dealing with Default
(2) HSBC Shipping Services Limited – Global Shipping Markets Review 2009
Contact Information:Ship Management Services Inc.
3251 Ponce de Leon Blvd
Coral Gables, Fl 33134
Tel: +1 305-507-2000
Fax: +1 305-507-2001
All Enquiries: Len Hoskinson [email protected]
Accounting: John Arthur [email protected]
Commercial: Allan Hoite [email protected]
Ship Admin: Gina Hung [email protected]
Technical: Deepak Matta [email protected]
