Mezeron & Steam Packet Master Thread

[Andy730]

 

My understanding is the IOMSPC have debts of getting on for £200million. The majority of these debts are bank loans incurred by the current and previous owners in order to buy the company; with very little spent on new plant and equipment.

 

In fact the ships are only valued at around £20million.

 

Which begs two questions; first, "why did the banks agree to lend the money when the company has so little assets relative to the debt"? Answer, because the IOM Gov signed a user agreement giving 25 years of rights to only drive on drive off loading facility on the Island, and that gave IOMSPC what looks like a monopoly on the transport of freight and private cars and bikes. Second question is "who is paying the interest on the loan" Answer, we all are in higher fares and freight charges.

 

Until, IOMSP gives back user agreement (which it clearly cannot afford to do) and another operator with less debt acquires the rights to the drive on/off facilities, we are all in for a tough time and probably higher fares. Mezeron might hurt IOMSPC but I doubt it cannot kill it and end the user agreement.

 

So,how do we stop a mess like this happening again ..... My suggestion would be; we (the IOM Government) buys and owns the ships and then tenders the rights for a commercial company to operate them for say 10 years. If the operating company fails to deliver the service/fare promised or cannot keep up payment for use of the ships, they loose the operating contract. That way our money pays in fares stays in the IOM economy and does not end up in interest payments to overseas banks.

 

What is happening at IOMSPC the same issue as Manchester United and Liverpool Football club .... however, the fans of the reds could always support City or Everton! .... we have nowhere else to go!

 

That sounds almost like nationalisation. You'd have a nationalised company (or it's tendered company) in direct competition with a private company; I wonder how the private company would see that?

Edited November 16, 2010 by Andy730

[Sean South]

That sounds almost like nationalisation. You'd have a nationalised company (or it's tendered company) in direct competition with a private company; I wonder how the private company would see that?

God forbid that it would be nationalised. Governments should stay well away from business. As for Mezeron, I'm sure they'd be delighted to compete against a Government organisation. That would be a doddle for them(or anyone!)

[Barrie Stevens]

The directors can easily give personal guarantees. Because it's common practice to let the company carry all directors liabilities. So even if you successfully sued a director the company, and ultimately the shareholders, would be the ones paying up.

 

My God, you are utterly, utterly clueless. What do you think a company's financial state is likely to be if a creditor is calling in a director's personal guarantee? Directors sign personal guarantees when they own the company, in order to be able to get credit, or get cheaper credit. Otherwise, they don't (unless they're stupid). If you were a director, you would probably give personal guarantees whether or not you owned the company.

 

 

Please remember that I said "Covenants" in addition to Personal Guarantees and it is the imposition of Covenants that has characterised offshore marine finance for some years now. (and why I am so poor to this very day!)Covenants!

[Barrie Stevens]

The directors can easily give personal guarantees. Because it's common practice to let the company carry all directors liabilities. So even if you successfully sued a director the company, and ultimately the shareholders, would be the ones paying up.

 

My God, you are utterly, utterly clueless. What do you think a company's financial state is likely to be if a creditor is calling in a director's personal guarantee? Directors sign personal guarantees when they own the company, in order to be able to get credit, or get cheaper credit. Otherwise, they don't (unless they're stupid). If you were a director, you would probably give personal guarantees whether or not you owned the company.

 

 

Please remember that I said "Covenants" in addition to Personal Guarantees and it is the imposition of Covenants that has characterised offshore marine finance for some years now. (and why I am so poor to this very day!)Covenants!

 

 

Personal Guarantees and Covenants.

 

My personal experience is this. Ships come under offshore companies of little nominal value. Things go wrong. Banks apply to Admiralty Court. Ships confiscated.

 

Banks invoke Directors personal guarantees backed by strict Covenants. Banks put this in Annual Report as looks good ie we have Covenants! Banks sell ships for $1 each to Isle of Man companies and banks put ships in hands of Isle of Man ship management firm.

 

Ships traded on chartering market at profit. Market rises. Ships increase in value. Banks still prosecute Covenants. We say that they must take into account value of ships and trading over two years. Banks say no.

 

Eventually English Court (Croydon of all places) states that banks have “Duty of Care” and when using personal guarantee plus Covenant and cannot simply sell for $1 and use Personal Guarantee and Covenants to pursue mythical loss.

 

In marine finance the myth of security is the Guarantee and Covenant. It is not stupid. It is the way the banks pretend to have security realistic or not. And it does not matter if the Directors have the assets or not as it is all kidology like most credit. (Witness mythical collateral security in property in the USA).

 

As to the Mezeron/Dohle operation. How extended are they with bank finance? What are their mortgages? (Are they fronting?)

 

When you charter on period time charter, (six months/year/two years etc.), there is a commitment but you only pay usually a month up front. This is usually thirty days in advance or so. Thus Mezeron (or whatever name they charter under) has little up-front commitment compared to the Steampacket’s commitment to tens of millions under the Linkspan Agreement.

 

You the punter pay the hire when you book/buy at Tesco. You make the Mezeron cash flow to pay the monthly hire. So a multi-million pound ship is acquired in disponent ownership for very little “up front” money.

 

One doubts that Mezeron would be so cocky if it had to assume the Steampacket’s passenger/private/vehicle/trailer burden even with a tiddler “Ben” type ship.

 

PS I never did get my share of Croydon County Court’s award!!!

[Tempus Fugit]

Kalana sat off Prestatyn all night after exiting the Mersey, BMC arrived as normal and off out again on time !

[Andy730]

Kalana sat off Prestatyn all night after exiting the Mersey, BMC arrived as normal and off out again on time !

 

I didn't see what the Ben loaded inside, but it's still noticeable that there's a distinct lack of freight on the top deck. She sailed just now with ONE trailer up top, the good old Royal Mail.

 

The other side of that coin was that I believe that when the Ben returned from Birkenhead over the weekend she brought some trailers for Tesco’s.

[jimbms]

Kalana sat off Prestatyn all night after exiting the Mersey, BMC arrived as normal and off out again on time !

 

I didn't see what the Ben loaded inside, but it's still noticeable that there's a distinct lack of freight on the top deck. She sailed just now with ONE trailer up top, the good old Royal Mail.

 

The other side of that coin was that I believe that when the Ben returned from Birkenhead over the weekend she brought some trailers for Tesco's.

Considering that sea this morning either the captain has grown a pair of bollocks or things are getting so tight they can't risk not sailing.

[Digga]

Considering that sea this morning either the captain has grown a pair of bollocks or things are getting so tight they can't risk not sailing.

looking at the direction of the wind it looks pretty well fixed in a EsE so the ben would be sailing directly into the weather which is easy for a vessel of that size , as for coming the other way with the wind on your stern would not be so easy as if the wind is quicker that the vessel can sail it would be pushing the stern of the vessel out to one side or the other which would make a terrible crossing for all on board

[P.K.]

I've been waiting with some interest for an SP response and to date there hasn't really been one. But in a way I suppose any response would either be limited or total. The sheer scale of the loan is a surprise to me. We're not talking small fry like Gordon Ramsay putting his house up against borrowing to keep swearing at all and sundry his dinky little company afloat - these are seriously corporate amounts of cash. A loan of £232m would need some serious security. And I just don't see anything like enough in the SP operation. And loans eventually have to be repaid. In this case how? I don't see how the SP was ever going to be able to repay the capital. And now, well, hell in a handcart!

 

It's always down to the £numbers and to me it seems these have never added up...

[Shit3hawk]

Awwww Tp is going to be upset as the Kalana is underway ................. but the ben is still struggling 2 hours in to the journey and just over half way.... i think only broken biscuits will be getting off the other side

[newaccount]

the blog has gone

[pongo]

A loan of £232m would need some serious security. And I just don't see anything like enough in the SP operation.

 

I am not talking about the SPCo. But debt, in general, can be backed by offsetting the risk.

 

You lend me £100 - not because I am 100% definitely good for it but because there is a greater than zero chance that I will keep up the payments. You buy insurance against me defaulting on that loan - perhaps from your cousin. Perhaps he even pays you a sort of backwards commission. If I default your cousin pays out. If I don't you get to keep the difference. This is, more or less, how some swaps work.

 

Perhaps you have relatives or neighbours and friends who also want to offset risky (or even 99% certain) loans by buying insurance from your cousin.

 

Your cousin has a nice business. But perhaps he sells on some of that risk / business to his friend who runs a fund. There is some commission. The clients of the fund, who also pay a commission, may not even know that part of what they are buying is the original £100 loan. Perhaps their friend said your cousin is a good bloke.

 

It's magic. What could go wrong ? We're a genius.

[P.K.]

It's magic. What could go wrong ? We're a genius.

 

Do you mean as per the famous Enron cows - beloved by Business Schools everywhere?

 

 

Capitalism

 

You have two cows.

 

You sell one and buy a bull.

 

Your herd multiplies, and the economy grows.

 

You sell them and retire on the income

 

 

Enron Venture Capitalism

 

You have two cows.

 

You sell three of them to your publicly listed company, using Letters of credit opened by your brother-in-law at the bank, then Execute a debt / equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The Annual report says the company owns eight cows, with an option on one more. - No Balance Sheet provided with the release. The shareholders buy your bull.

 

Edited to add the rest:

 

TRADITIONAL CAPITALISM -- You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

 

AN AMERICAN CORPORATION -- You have two cows. You sell one, and force the other to produce the milk of four cows. You are surprised when the cow drops dead.

 

FRENCH CORPORATION -- You have two cows. You go on strike because you want three cows.

 

A JAPANESE CORPORATION -- You have two cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk. You then create clever cow cartoon images called Cowkimon and market them world-wide.

 

A GERMAN CORPORATION -- You have two cows. You re-engineer them so they live for 100 years, eat once a month, and milk themselves.

 

A BRITISH CORPORATION -- You have two cows. Both are mad.

 

AN ITALIAN CORPORATION -- You have two cows, but you don't know where they are. You break for lunch.

 

A RUSSIAN CORPORATION -- You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 12 cows. You stop counting cows and open another bottle of vodka.

 

A SWISS CORPORATION -- You have 5000 cows, none of which belong to you. You charge others for storing them.

 

A HINDU CORPORATION -- You have two cows. You worship them.

 

A CHINESE CORPORATION -- You have two cows. You have 300 people milking them. You claim full employment, high bovine productivity, and arrest the newsman who reported the numbers.

 

AN ARKANSAS CORPORATION -- You have two cows. That one on the left is kinda cute.

 

ENRON CORPORATION -- You have two cows. You sell three of them to your publicly listed company, using Letters of credit opened by your brother-in-law at the bank, then Execute a debt / equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The Annual report says the company owns eight cows, with an option on one more. - No Balance Sheet provided with the release. The shareholders buy your bull.

 

ARTHUR ANDERSON, LLC -- You have 2 cows. You shred all documents that Enron has any cows, take 2 cows from Enron for payment for consulting the cows, and attest that Enron has 9 cows.

Edited November 17, 2010 by P.K.

[pongo]

Oh I forgot to tell you. I used that £100 to buy into your cousin's friend's fund. That shouldn't be a problem, should it ?

[Frances]

The initial buyout from sea containers was just about ok - there were some assets which were stripped by the first australian owners - however the figure paid by McQuarries was crazy - I pointed out at the time that the only way it could pay was at the cost of about £1000pa per household on the Island (there arn't enough tourists to seriously dent the cost even tho TT attendees are truely ripped off) - however the fincial geniuses on this MB were of the opinion that it would all work out well and I was using grandma type financing methods.