As a result of the transaction, Algoma’s interest in the pool will increase to approximately 40%. The company currently owns five vessels operating in the pool.
The pool consists of 18 self-unloading vessels ranging from handy-sized to Panamax and provides specialized shipping services to customers along the coasts of the Americas and in the Caribbean.
As a result of this transaction, Algoma will acquire the handy-sized m/v Alice Oldendorff, and the m/v Harmen Oldendorff and the m/v Sophie Oldendorff, both of which are Panamax vessels, for USD 100 million. The deal is expected to close late in the second quarter of 2019.
“Increasing our participation in the pool has been a strategic interest for Algoma for some time and the completion of this transaction is aligned with that intent,” said Ken Bloch Soerensen, President and Chief Executive Officer of Algoma.
“During 2018, we assumed technical management of our existing pool ships and opened a new office in Fort Lauderdale with an expanded technical staff. We expect to assume technical management of these three ships seamlessly on closing.”
Algoma expects to fund the transaction principally from the proceeds of the refund guarantees from the cancellation of four Croatian shipbuilding contracts.
“Redeploying the proceeds of the refund guarantees in this manner enables us to put those funds to work quickly in a business we know well with attractive returns,” said Peter Winkley, Chief Financial Officer of Algoma.
“Although a decision is pending on the replacement of the vessels that were to have been built by Uljanik shipyard, we expect to fund any installments required on such replacement contracts from operating cash flows and available credit facilities.”
The company canceled four ships at Uljanik last year as the struggling Christian shipyard was making very slow progress on the construction. The first contract for the construction of one Equinox self-unloader was rescinded in September 2018. Three more cancellations of Equinox vessel contracts followed suit in October 2018.
According to Sorensen, the cancellations eliminated CAD 145 million (USD 110 million) of commitments and CAD 112 million of installment refunds was expected.
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Photo Courtesy: Algoma