THE PERFECT STORM : The BLT Restructuring Story Connecticut Maritime Association Luncheon February 18, 2016
Based Upon Actual Events The True Story of the Four Year Restructuring of Berlian Laju Tanker 1
Prologue – Fair Winds & Following Seas: 1981-2007 If you have too much cargo, there is always a solution …. If you don’t have enough cargo, there is no solution – Stolt-Nielsen Chartering Mgr. 1985 • Hadi Surya founds Berlian Laju Tanker in 1981 (BLT) as a time-charter operator; firstly securing cargo requirements and then chartering-in the ships to perform In the 1980s BLT begins transition to owner-operator purchasing 2 nd hand tonnage • • 1990: BLT lists on the Jakarta Indonesia Stock Exchange (IDX) • 1998: BLT acquires Gold Bridge Shipping of Hong Kong • 2006: BLT lists on the Singapore Stock Exchange (SGX) • December 2007 – BLT acquires Chembulk Tankers for $850M and is acclaimed as the world’s 3 rd largest owner-operator of stainless steel chemical tankers 2
Chapter 1 – The Gathering Storm: 2008-2011 “The trick to making money in shipping is to have a cheap ship” – Stolt-Nielsen Managing Director 1985 • 2008: Sub-prime mortgage crisis triggers global economic meltdown ending the good chemical tanker market of the previous 5 years • 2009 – 11: Oil prices increase from mid-$40s to ~$100/BBL • 2008-11: BLT takes delivery of 13 Japanese stainless steel chemical tanker NBs • US$ declines significantly vs. JPY making the NBs 25-33% more costly at delivery • NBs are financed almost entirely through sale and lease-back arrangements • BLT increases debt load via various bond offerings • 2011: Refinance of the 39 owned ships (BLT-GB-CBT) by DNB led 7-bank MLA • The sustained chemical tanker market trough, coupled with rising oil prices, substantial finance cost and the mounting debt prove too much for BLT to endure 3
Chapter 2 – The Storm is Upon Us! • Early January 2012 – BLT informs MLA syndicate of impending cash crunch • MLA mandates all revenues to DNB earnings acct • January 25, 2012 – BLT announces suspension of stock trading and debt-standstill ! • FTI Consulting appointed as restructuring advisors by MLA syndicate February 2012 – Creditors commence enforcement tactics: Three lessors repossess 5 bareboat leased tankers following defaults Another lessor files maritime law Rule B in US Federal Court in Hartford, CT Two bunker suppliers arrest two BLT tankers while performing Chembulk voyages Some other BLT tankers arrested by various creditors in various jurisdictions • A few of BLT’s customers suspend business relationship/void COAs • Facing a difficult reality, an air of disbelief pervades across BLT Group BUs 4
Chapter 3 – Maintaining Stability February 2012 • The Chembulk Tankers BU continues to be fully solvent going concern, but ... • Numerous in-person meetings and conference calls with customers • Business disruptions are minimal as Chembulk business partners remain supportive. • MTI Network engaged by Chembulk to assist with and manage PR • Chembulk engages direct dialogue with MLA lead bank DNB • CBT CEO circulars assure customers, vendors and staff that “all is well” 5
Chapter 4 – Hove to and Damage Control March 2012 • Borrelli Walsh appointed by BLT as its restructuring advisor and Cos Borrelli is named Chief Restructuring Officer • Borrelli immediately “quarantines” the solvent Chembulk and Gold Bridge BUs from BLT Everything going to be OK! • Other damage control measures to “stop the bleeding” are implemented • Borrelli requests hands-on assistance in Jakarta from Chembulk management team • Jack Noonan and COO Dan Dahlgard begin the first of alternating month-long assignments in Jakarta which will continue into early 2015 • Damage control measures implemented, a mood that “all will be OK” sets in 6
Chapter 5: Commencing Navigation Out of the Storm April – June 2012 • Key vendors – i.e. bunker suppliers, tugboat companies, port agents etc. – are engaged • Payment schedules/plans are established • Remaining bareboat leases reworked into new BB or or time charters with CBT • Commence transition process from GBLT It’s not personal. It’s strictly business. (BLT in-house ship mgt) to 3 rd party I’m going to make them an offer they technical managers for owned ships can’t refuse • Fifteen loss-making ships are sold, scrapped or redelivered to their owners • Unprofitable COAs are not renewed at expiration • BLT offices in Shanghai, Dubai and Mumbai are closed • The first draft of the restructuring plan is presented to the MLA on June 30 th 7
Chapter 6: Salvage Operations – The PKPU “ If I owe you 100 pounds, I have a problem; if I owe you one million, the problem is yours.” – John Maynard Keynes 1883-1946 July 2012 – March 2013 • On July 2 nd , an Indonesian bank invokes a PKPU – literally translated meaning “suspension of payments” – on BLT • The PKPU process safeguards BLT’s assets and must be concluded within 270 days • During the process, new payment plans cannot be made, assets disposed of or new loans obtained without the Jakarta court- appointed Administrators’ consent • The restructuring plan is submitted to participating creditors for approval • If approved, the plan becomes binding on all participating creditors irrespective whether they voted for approval or not • If creditors reject the plan, or if the PKPU process is not concluded within the 270 days, the company is required to be liquidated. On March 14 th creditors approve the plan which is then sanctioned by the Jakarta court • • The MLA had not participated in the PKPU but instead tried unsuccessfully to sell its debt 8
No Chapter 7 The PKPU process was successful and BLT was spared from liquidation. =========== Therefore no need for a Chapter 7! 9
Chapter 8: Riding Out the Storm “This is my boat. We're gonna ride this thing out, not for fun, for safety. Do what I've always done: go with the flow .” – Sebastian Junger: The Perfect Storm April 2013 – January 2014 • The PKPU ruling is recognized under US Chapter 15 and Singapore Section 210 and is deemed internationally sanctioned • In return for MLA support of the PKPU approved plan and an infusion of working capital, it is granted share pledges over the Chembulk Tanker operating platform • Having bottomed out, the chemical tanker markets gradually but steadily begin to improve • Sensing an increased value in its security over the remaining 27 owned ships and the Chembulk platform, MLA banks begin to tender for sale their debt in BLT 10
Chapter 9: Underway and Making Way “ One man’s trash is another man’s treasure.” – 17 th century English proverb February – April 2014 • Member banks in the MLA begin to successfully market their share of the debt • KKR leads the way buying a percentage similar to lead bank DNB (~30%) • York Capital follows suit and buys a sizeable share • Together KKR and York jointly own the majority of the debt (ultimately ~85%) • A number of other PE firms and investment banks purchase smaller tranches • All 7 banks in the original MLA exit as these PE firms and banks ultimately buy and own all of the secured debt in BLT, providing them with: • Security over 27 owned ships – 23 chemical tankers and 4 LPG carriers – and • Share pledges over the Chembulk operating platform inclusive of 7 leased ships with purchase options, 5 time-chartered ships and all of the COAs. 11
Chapter 10: Change of Command • May 2014 – April 2015: Negotiations take place between BLT and KKR & York for a Restructuring Support Agreement (RSA) providing for the conversion of debt to equity in a new company to retain the name Chembulk Tankers. April 24 th – the RSA is successfully concluded • August 14 th – BLT’s creditors overwhelmingly (85%) vote to approve the RSA • November 17 th – BLT’s shareholders overwhelmingly (70%) vote to approve the RSA • November 30 th – the owned ships and Chembulk operating platform are successfully • transitioned out of BLT December 1 st – Chembulk Tankers and its 39-ship fleet commence operations as an • independent company, with KKR & York as its majority shareholders • BLT emerges from restructuring a considerably smaller, but solvent, going-concern. 12
CHAPTER 11 CHAPTER 11 13
Epilogue: The Value of the Security Laws of Conservation of Mass and Energy: …. They can be neither created nor destroyed – High School Chemistry 101 As per Gordon Gekko perhaps the Laws of Conservation do apply to money ….. or intrinsic value • The MLA originally held security over 27 ships, but not over Chembulk’s operating platform “Money itself isn't lost or made, it's simply transferred from one • Absent the platform, the value of the MLA’s security perception to another.” was a fraction of the par value of the debt • Enforcement on the ships would have netted much less than what was ultimately achieved, with those buyers benefitting instead of the MLA syndicate • Chembulk Tankers would have likely been dissolved resulting in: - The time-chartered ships and purchase options going back to the head owners - The COAs going to other owners and operators - The management team and staff being employed elsewhere The intrinsic value not destroyed but “transferred from one perception to another.” 14
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