The Greek Navios Group and the German bank HSH Nordbank AG have agreed on an innovative financial solution for vessels on the brink of insolvency.
The deal involves 10 vessels ‘where previous restructuring measures with the existing owners have been exhausted and failed’ but that are deemed ‘marketable and economical from an operative point of view.’ The portfolio, consisting of 5 tanker ships and 5 container vessels, all built after 2005, will be acquired by ‘Navios JV’, a special purpose vehicle set-up by Navios Maritime Holdings and Navios Maritime Acquisition Corporation.
The ships, believed to be owned by German KG-Funds, are in financial distress, either laid-up or trading below current market levels.
The identity of the container vessels has not yet been disclosed, but Navios said the five units included 2 Panamaxes and 3 Sub-panamaxes: a 3,398 teu vessel, a 3,091 teu vessel, a 2,824 teu vessel, a 2,741 teu vessel and a 2,007 teu vessel – all built between 2006 and 2008. For Navios, which is primarily a bulk vessel owner, the deal marks the entry into the container segment. Both partners aim to leverage ‘Navios economies of scale and superior technical and commercial management’ and to take the ships out of their current situations.
HSH Nordbank will not only achieve a better operational management of the fleet, but also a reduction of its current 300 million risk exposure down to 170 million, and a reduction of its balance sheet.
The finance structure envisages three tranches:
- equity, in the amount of 10 million USD, provided for by Navios;
- a senior bank financing, in the amount of 120 million USD, secured with a first rank mortgage on the vessels;
- a participating loan, in the amount of 170 million USD, held by HSH Bank.
The deal foresees distribution of operational proceeds and both HSH Nordank and Navios press releases give a great level of detail on how the equity (Navios) and the subordinated debt (HSH Nordbank) are being remunerated. Navios secures a preferred return on its equity investment, HSH Nordbank secures 80% of the free cash-flow until being fully repaid. The unknown and certainly the most interesting part is how the senior debt tranche of Navios JV is to be serviced.
Securing this tranche is obviously one of the conditions to satisfy for the transaction to take place, and might be a difficult one?