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Global Ship Lease, Inc. Message Board

  • edgetrader2001 edgetrader2001 Oct 23, 2012 3:57 PM Flag

    GSL Correspondence with SEC...interesting

    SEC just released correspondence letters with GSL. There were two interesting pieces, in my opinion.

    First, GSL has agreed to indicate the likelihood of passing the next round of LTV tests in its next 20-F, per the request of the SEC. Of course, attorneys could make this disclosure appropriately vague and all-encompassing, but hopefully this will provide more visibility to existing and potential shareholders.

    Second, had vessel values remained constant from Nov 2011 levels, it appears GSL believed it would have passed the NOV '12 LTV test. That was a bit of a surprise to me b/c I thought we might have had another year to go. Of course, with increased layups we're likely back in a position of NOV '13 as the pass date (or perhaps May, if the banks and management decide to extend the waiver for 6 months instead).

    Here is the language pertaining to the second point:

    The next scheduled test of the leverage ratio is as at November 30, 2012, within 12 months of the balance sheet date. All of the Company’s vessels are employed under fixed rate time charters with 15 out of 17 charters having a term of at least until late 2016. The remaining two vessels had charters that expired at the earliest in late September 2012. New charters were agreed in July 2012 for these two vessels, commencing late September 2012 and expiring late May 2013. The cash flow to be generated by the Company’s operations for 2012 is therefore highly predictable. Under the waiver from the leverage ratio tests agreed, all cash flow is to be used to prepay borrowings under the credit facility, using a cash sweep mechanism. The amount of cash in excess of $20 million as at November 30, 2011 (and quarterly thereafter) would be the amount of the prepayment due December 31, 2011 (and quarterly thereafter). Taking into account projected repayments of borrowings under the cash sweep, the Company estimated, at the time of the completion of the financial statements for 2011, that the outstanding loan as at November 30, 2012 would be approximately $448 million. In order to pass the leverage ratio test based on this amount of outstanding borrowings, the aggregate value of the vessels would need to be at approximately the same level as the indicative valuations of November 30, 2011. Notwithstanding a likely decline in vessel values between November 2011 and April 13, 2012, when the 2011 financial statements were completed, there were no indications that it was probable that vessel values would not be at a sufficient level in November 2012 for the Company to be able to pass the leverage ratio test as at November 30, 2012.

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