While many Wall Street observers applauded the first phase of the plan, which calls for the construction four 10,000-teu boxships that will be chartered to Mitsui OSK Lines (MOL), many said the second part of the transaction was “tough to swallow”.
Justin Yagerman, an analyst at Deutsche Bank, was quick to question the rationale behind the purchase of four 2003-built 4,600-teu containerships from MOL, which will take the units back on short-term fixed-rate contracts upon delivery this year and next.
In a note to clients he pointed out that the second-hand units likely carry a charter-free value of around $20 to $23m a piece before expressing concerns about heightened exposure to the panamax containership segment.
“We are uncertain of how the cascading of newly delivering larger and/or more fuel-efficient ships will play-out in the containership trade longer-term, and are cautious of smaller ships and short-term contracts,” Yagerman explained.
“With nearly 50 panamax or smaller vessels (of the nearly 70 operating), we believe Seaspan already has enough exposure to the smaller containership segments. It is more than likely that the Panamax acquisition came as package deal with the new vessel orders, but the smaller size and short-term contracts detract from what otherwise is likely a solid deal.”
Michael Webber, a researcher at Wells Fargo Securities who believes the newbuildings could between $79 and $83m a piece, offered a similar reaction in a note that described the accelerated pace of Seaspan’s fleet expansion programme as “positive” on the whole.
“While we generally view the acquisition of fuel efficient newbuilds with long-term charters as a positive for Seaspan, the addition of the four older, smaller assets is a bit perplexing (given that segment's lower utilization and softer prospects), with exposure to that market acting as a headwind for most,” he told clients.
“That said, the lack of several details around prices, rates, and split between Seaspan and its JV make the impact of the deal difficult to completely evaluate. On the whole, however, we tend to view Seaspan's broader moves towards renewing its fleet growth program as a positive, as it potentially reinforces/builds on its growth-oriented multiples.”
