RE: Mooky and stakeholders20 Sep 2022 23:07
Hope springs eternal:
Danaos, a NYSE-listed, Marshall Islands-incorporated, Greek-headquartered international owner of containerships that chartered its 55 vessels to many of the world's largest liner companies, found itself exposed to an exceedingly weak containership market, which was exacerbated by Hanjin Shipping's 2016 collapse. While in Korean receivership, Hanjin cancelled eight long-term fixed rate charters. To make matters worse, in July 2018 Danaos had agreed to charter modifications with Hyundai Merchant Marine that substantially reduced its charter revenues. From December 2016 until completion of its restructuring in August 2018, Danaos operated in financial covenant default (at times subject to waiver). This inevitably resulted in certain of its indebtedness in multiple silos trading at a discount into the hands of a number of distressed investors.
Following 15 months of negotiations, certain lenders to Danaos spearheaded the entry by its stakeholders into a restructuring support agreement in May 2018 (the RSA). The structure of Danaos's secured debt documented across 11 different facility agreements, each secured on a different set of containerships required the possibility of implementation through a US Chapter 11 proceeding. Other restructuring options such as a UK scheme of arrangement were prohibitive due largely to class composition issues, whereas others such as a Greek insolvency proceeding would have been likely to be value destructive. To motivate disparate lenders to decide on their preferred take-back consideration Chapter 11 was presented as the fall-back option.
Following further negotiations among Danaos' stakeholders and a $320m new debt commitment from Citibank, in June 2018, the parties entered into an amended and restated RSA providing for implementation by way of a fully consensual out-of-court restructuring. The RSA was governed by New York law and the out-of-court restructuring was governed by English law and consisted of an amendment and extension of all of Danaos's loan agreements, together with a partial equitization of Danaos's $2.2bn secured term loans, which reduced its outstanding debt by $551m. The new Danaos common shares provided to the equitizing and consenting lenders equalled 47.5% of its post-restructuring outstanding equity, and the shares remained listed on the New York Stock Exchange. The restructured term loans, the first maturity of which was extended to December 2023, were documented across nine facility agreements, each secured on different vessels, are further governed by five different intercreditor agreements each executed through meticulous implementation mechanics.
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