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Seaspan Corporation Message Board

  • jgcoutts jgcoutts Sep 10, 2007 4:23 PM Flag

    Signs contract for 8 new 13,100 TEU's

    HONG KONG, CHINA -- (MARKET WIRE) -- 09/10/07

    Seaspan Corporation ("Seaspan") (NYSE: SSW) announced today that it has signed contracts to build eight new 13,100 TEU container vessels with Hyundai Heavy Industries Co., Ltd. and its subsidiary, Hyundai Samho Heavy Industries Co., Ltd. (collectively "HHI"). The contract price per vessel is approximately $165 million resulting in an expected delivered cost per vessel of approximately $181 million.

    The eight new buildings are scheduled to be delivered between January 2011 and October 2011. With these agreements, Seaspan has expanded the company's contracted fleet to a total of 63 vessels. Currently, 20 of Seaspan's 34 vessels on order are with HHI, the largest shipbuilding company in the world.

    Seaspan also announced that all eight vessels have been simultaneously signed to 12-year time charters with COSCO Container Lines Co., Ltd. ("Coscon") of Shanghai, one of the largest container liner shipping companies in the world. The time charter rate is $55,000 per vessel per day for the duration of the contract, again with no commissions or broker fees. Seaspan Management Services Limited will supervise the construction of the vessels and then operate the ships at an estimated fixed rate of $6,750 per day per vessel from delivery.

    Upon delivery, based on these operating fees, each new vessel is expected to contribute more than $17 million in incremental EBITDA per annum for a total exceeding $136 million for all eight vessels. EBITDA is a non-GAAP measure defined as net earnings before interest, undrawn credit facility fees, taxes, depreciation and amortization of deferred financing fees.

    Gerry Wang, Chief Executive Officer of Seaspan, stated, "Building on the success of our agreement to charter eight new 8,500 TEU vessels in April of 2007, we are pleased to further strengthen this strategic relationship with Coscon. Their position as the largest China-based container line and 7th largest in the world combined with their stellar credit quality adds considerable value to this investment. In addition, we believe this transaction for super-sized container vessels demonstrates Seaspan's ability to conduct large-scale, cost-efficient deals in this important asset class."

    Wang added, "Consistent with our objective to secure our vessels on long-term fixed-rate charters with leading global customers, our 12-year charters for each of the eight newbuildings provide stable cash flows for Seaspan. With 22 newbuilding contracts already announced to date in 2007, Seaspan continues to successfully execute its growth strategy."

    "Currently, we have 34 vessels scheduled to be delivered between 2008 and 2011 which will generate predictable and growing cash flows resulting in annual revenues of $640 million and annual EBITDA exceeding $500 million by the end of 2011. By significantly expanding our earnings power as we further grow our fleet, we have enhanced our ability to increase distributable cash flow over the long term."

    Seaspan plans to initially fund the first installments of its eight new 13,100 TEU container vessels through its existing $1.3 billion revolving credit facility. Permanent financing for this transaction is expected to be concluded in the following months.

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    • >>>"Currently, we have 34 vessels scheduled to be delivered between 2008 and 2011 which will generate predictable and growing cash flows resulting in annual revenues of $640 million and annual EBITDA exceeding $500 million by the end of 2011.<<<

      With 53.05 shares outstanding, that would be earnings before EBITDA of $9.43/sh.

    • Wang's last line "Permanent financing for this transaction is expected to be concluded in the following months." Are we to assume this means by issuing more shares? Don't have a problem with Wang's system of dilution as long as the ships are more accretive to earnings. Which means, also like another poster has noted- as long as the contracts are firm and contain no loopholes should things change in the future i.e.-oversupply of container ships, contracted company runs into its own problems, government changes, etc. Wang's business plan sometimes looks just too darn easy but so far I can't complain with the results.

      • 1 Reply to cubatogo2003
      • jdfunnell@sbcglobal.net jdfunnell Sep 13, 2007 9:31 PM Flag

        In the conference call, Sai Chu alluded to no need for further equity issuance until 2009. But I did note some movement, with a reference to 50/50 debt and equity, while under Kevin Kennedy's watch the reference was to 60 debt and 40 equity. This sounds strategic, but might end up being more of a tactical issue surrounding current credit markets.

        (Additionally, the fact that underwriters did not exercise over-allottment rights this time around might have taken away some zeal to tap the equity markets again any time soon.)

        Are these deals iron-clad? Who knows? None of us have seen them. Is this a risk? Maybe. But to me, a time charter is a time charter and is like a lease. If a department store wants to close a location, it's free to do so, but owes the rents through the end of the lease. They can negotiate a buyout, or get out from under it via bankruptcy. Or if they own the location outright, they can do whatever they please. So I think the charterers mothball their own ships before they negotiate out of the charter or go some BK route. These charters had to be sufficiently strong to allow Seaspan to take them to the bank(s) and line up permanent financing at highly favorable rates. That last point, I guess, is the one that's good enough for me.

        And Gerry's comments emphasizing credit quality of the charterer speaks volumes about the fact that these guys have their eyes focused fimly on the ball. Wang & Co. are going to make a bazillion dollars when this baby grows up (read up on the dividend cut they get as the dividend goes up, deep in the IPO document). So what? The crumbs that fall off that table will make our retirement a half-million dollars better than I ever dreamed about..........Dave

        P.S. China crackdown after the Olympics? (Forgive me for digressing, but it does have something to do with our mutual investment.) Now you're getting into geopolitics, my area of great interest, though not expertise. 2008 is China's great Coming Out Party on the World Stage. They will do nothing to mar the Party. (A deliberate double-meaning there.) Beware Spring, 2009. That's when the Olympics are behind them and a new American President needs to be tested on resolve. (It happened in Spring, 2001; it will happen in Spring, 2009.) It will just be China's way to to understand the strength or weakness of a new Administration and to better understand the resetting of the table at which they sit. But it will not disrupt World Trade in the long run. It will be a political event, not an economic event. The economy, which is after all no more than the aggregate efforts of you and me to make a living every day, will do just fine. And so Seaspan will do just fine. Their ships will ply the waters, delivering goods we want. The politicans might try to get in the way, but the demand of humanity is to progress, and we will.

    • You have to love the Wang:

      "Currently, we have 34 vessels scheduled to be delivered between 2008 and 2011 which will generate predictable and growing cash flows resulting in annual revenues of $640 million and annual EBITDA exceeding $500 million by the end of 2011. By significantly expanding our earnings power as we further grow our fleet, we have enhanced our ability to increase distributable cash flow over the long term."

      This guy had a clear vision and is following through better than anyone I have have followed (in the business world). This guy backs every word with action. I think I am going to buy more.

      Does anyone see any negatives with this company? The 12 year charters seem so solid.

 
SSW
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