(Bloomberg) — Rickmers Group is breaking with tradition as it seeks to become the first German charter shipping company to raise money in the bond market.
The family-owned company, which traces its roots back 179 years to a shipyard in the port town of Bremerhaven near its headquarters in Hamburg, is meeting investors this week before a potential sale of as much as 200 million euros ($258 million) of five-year notes, said chief executive Ronald D. Widdows in an interview.
Europe’s shipping industry has been hurt by falling demand for seaborne goods and overcapacity amid the region’s debt crisis, prompting banks such as Commerzbank AG and HSH Nordbank AG, the world’s biggest shipping lender, to reduce or stop funding to the sector. Operators in Germany, as home to the world’s largest container shipping fleet, are among the worst affected.
Rickmers used to borrow from limited partnerships known as Kommanditgesellschaften, which offered certain tax breaks, said Widdows. That market closed as the shipping industry slumped, forcing the company and its German peers to find new sources of financing, he said.
“Rickmers is a very traditional German ship-owning company like many in this sector,” said Widdows. “We are the first ones to enter the public arena so the transparency that we now provide not just to investors but to customers and the investment community as a whole, is unique.”
The company, which is rated BB, or two levels below investment grade, by Creditreform Rating AG, plans to pay an annual coupon of 8.5 percent to 9.125 percent on the bonds, which it will begin marketing on May 27 for a minimum 1,000 euros each. Rickmers will use the proceeds to refinance debt and modernize its fleet, the company said.
“Half the funds will be used to do some work on existing debt and restructuring, the other half is to strengthen our heavy lift and break bulk business and potentially also new ship buildings, but large new building projects are for the future,” said Widdows.
Rickmers charters vessels to large container shipping lines such as Hapag-Lloyd AG and AP Moeller-Maersk A/S. It also operates a specialized liner service transporting heavy cargo such as locomotives, wind turbines and parts for the chemicals industry.
“We have seen a lot of interest from small investors,” said deputy chief financial officer Mark-Ken Erdmann in the same interview.
“We need to engage with different investors, investors that look at counterparty risk differently, banks that aren’t traditional ship finance banks,” said Widdows. Interested parties also include “some very large funds” as well as private banks, he said.
Christof Lauer, a spokesman for German shipowners’ association VDR, confirmed that Rickmers will be the first German charter company to sell bonds. The group expects more companies to enter the market as the Kommanditgesellschaft model disappears, he said.
Rickmers will market its bonds until June 7 and Frankfurt- based Close Brothers Seydler Bank AG will be the sole global coordinator and bookrunner for the sale.
– Angela Cullen and Nicholas Brautlecht, Copyright 2013 Bloomberg.