By Pacific International Lines.
Pacific International Lines has announced that the company will be making a billion dollar early repayment to creditors who were subject to the Scheme of Arrangement (Scheme).
PIL entered into the Scheme as part of its restructuring in 1Q 2021. PIL has added that it will satisfy all Scheme obligations following the prepayment, which is envisaged to complete by 30 December 2021. The total amount to be repaid will be US$1 billion.
PIL will be a well-capitalised company with a solid financial structure and resilience to address and mitigate the cyclical nature of the industry going forward, the company said.
Prepayment
Creditors of the Scheme that PIL will repay by 30 December 2021 are the Reinstated Senior Debt creditors and holders of the issued Option A securities (Option A SPCS) and Option B securities (Option B SPCS).
The details are as follows:
- Early repayment in full of the Reinstated Senior Debt (together with accrued interest) – The Reinstated Senior Debt creditors are mainly financial institutions that had extended loans to PIL;
- The redemption of Option A SPCS, with each holder receiving the principal amount together with the distributions which would be accrued to the date of redemption;
- For Option B SPCS, PIL conveyed its appreciation to the holders for the 50% haircut voluntarily undertaken as part of the Scheme. As such, PIL would redeem Option B SPCS with each holder receiving 200% of the principal amount in total, inclusive of any distributions accrued to the date of redemption. This is above and beyond PIL’s contractual obligations to holders of Option BSPCS.
Rationale
The global shipping industry, including PIL, has generally benefitted since 2021 from strengthening freight rates due to restricted supply, the company said. It added that COVID-related disruptions to supply chains and port operations have resulted in a shortage of containers and vessel delays, which reduced available shipping capacity. At the same time, increased pandemic-related consumption of physical goods has led to a rise in demand.
Following the restructuring in 1Q 2021, PIL also implemented various business, financial and operational initiatives, enabling the company to benefit from the upturn in the shipping market.
Mr SS Teo, executive chairman, PIL, said, “Over the past eight months, we have experienced the most dramatic turnaround in our financial position. In addition to the market recovery, our strong business fundamentals, ongoing restructuring initiatives and the hard work of our employees have improved our overall position. With our healthy cash flow situation, we decided that it was only right that we reciprocate the support shown to us by our creditors and partners, and repay the debts owed to all our Scheme creditors, ahead of schedule. We believe that they would benefit from the certainty of having cash returned to them earlier than anticipated. By satisfying the terms of the Scheme fully with the repayment and continued financial prudence, PIL will be able to enjoy a strong standing with financial institutions, customers and suppliers. This will enable PIL to strive ahead to grow a strong business built on a sustainable capital structure.”
Looking Ahead
As part of its reviews over the past year, PIL has strengthened and focused on trade routes in China, Asia, Africa, the Middle East, South America and Oceania. Over the past few months, PIL has added several direct services: a direct Mozambique service; South China to India West Coast express service; and a direct China to Gulf service.
PIL continues to drive digitalisation and sustainability initiatives. Ongoing digitalisation efforts such as e-Services, satellite communication, cybersecurity, and predictive maintenance solutions have enabled PIL to provide efficient, reliable services to customers and improve the welfare of its seafarers, the company said. PIL is collaborating with partners to decarbonise its vessel operations.
