Published April 2, 2009

Bank raises rate on Rickmers Maritime loan

It invokes market disruption clause in loan terms

By VINCENT WEE

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JITTERY financial markets continue to be the thorn in the side of corporates as shipping trust Rickmers Maritime yesterday announced that one of its banks has invoked the market disruption clause in the loan terms and will consequently levy a higher interest rate on its loan.

First Ship Lease Trust (FSLT) got hit with this same problem in October and this time it is Rickmers' turn and it will result in an about US$47,000 rise in interest cost for this fixing period. However, it will not have a significant impact on its earnings per unit for the financial year ending Dec 31, trustee-manager Rickmers Trust Management said.

The market disruption clause is invoked when the US$ Libor, which is the reference rate on the loans, does not accurately reflect the lenders' actual cost of funds.

In response to queries in the wake of FSLT's problems in October, Rickmers said then that though it had the clause in its loan documents it had not been invoked yet. The increased interest costs then caused FSLT to reduce its Q408 distribution per unit guidance by 1 per cent.

Three-month US dollar Libor rates hit their lowest in two months in London falling one basis point to 1.1768 per cent yesterday, Reuters reported.

'The increase in interest rate pursuant to the invocation of the market disruption clause by the bank by no means reflects the credit-worthiness of Rickmers Maritime. Where Rickmers Maritime is concerned, we continue to enjoy strong cash flows and have met all our loan obligations promptly,' reiterated CFO Quah Ban Huat.

Rickmers Maritime has credit lines with nine other banks, none of which has invoked the market disruption clause, Mr Quah added.

Separately, Rickmers said yesterday that is has taken delivery of its 16th containership, Hanjin Newport, the first of four ships chartered to Hanjin Shipping, South Korea's largest container liner company.

The 4,250 twenty-foot equivalent unit (TEU) newbuild vessel from Jiangsu New Yangzijiang Ship Building commences a seven-year fixed-rate time charter to Hanjin Shipping.

Rickmers units closed unchanged at 34.5 cents yesterday.