Seaspan Completes Boxship Sales in Asset Management Strategy
Seaspan, which is the largest independent owner and charterer of containerships, is moving aggressively in its asset management strategy to realize opportunities in the industry. After developing a large orderbook, the company last quarter took advantage of market conditions with strategic asset sales. While maintaining a fleet of 127 vessels, the company also completed nine strategic vessel sales during the second quarter realizing more than $224 million in gross proceeds for its parent company Atlas Corp.
Starting in 2020 and into 2021, Seaspan leveraged its existing relationships with the leading carriers providing an important source for fleet expansion. Anxious to build out their fleets to meet soaring demand, carriers ranging from COSCO to Zim all have relationships with Seaspan and entered into new long-term agreements calling for the construction of new ships. Since going public in 2005, the company has built 117 containerships, but in the last two years dramatically expanded its order book with an additional 67 vessels on order mostly due for delivery in 2023 and 2024. The current expansion program will increase capacity by more than 800,000 TEUs.
"Seaspan's customers continue to value our long-term partnerships with the forward fixing of three operating vessels in the second quarter, and an additional 14 since the end of the quarter,” explained Bing Chen, President and CEO of Atlas yesterday as the company reported second quarter results. “We are working diligently to deliver our newbuild program on time and on budget, and thanks to our experienced team and integrated platform, all seven of our newbuilds were delivered ahead of schedule.”
While much of the attention remains on the newbuilds, Seaspan however also quietly undertook strategic divestments from its fleet in response to the continuing strong demand for vessels and capacity across the industry. During the second quarter, the company sold nine of its smaller vessels, each with a capacity of 4,250 TEU. It marked an increase in divestment activity as the company had sold only one vessel in each the first quarter of 2022 and fourth quarter of 2021. For all of 2021, Seaspan sold a total of seven vessels.
“Our long-term model and diligent focus on asset quality is evidenced through ten strategic vessel divestments this year, generating an additional $257.1 million in cashflow to optimize our balance sheet and allocate capital to future growth and further optimize our fleet,” explained Graham Talbot, CFO of Atlas.
The company is also moving to a larger vessel as part of its strategic fleet management. While divesting smaller capacity containerships, they also added this quarter the last two new ships each with a capacity of 12,200 TEU that are part of an 18-year charter deal for a total of five ships. They also accepted the first two ships each with a capacity of 11,800 TEU for another charterer. Four more vessels in the newbuilding program are scheduled for delivery this year.
Currently, 63 of the vessels are on confirmed orders while in May they entered into shipbuilding contracts for four additional 7,700 TEU containerships that will be fueled by LNG. This latest order is yet to be confirmed subject to certain closing conditions the company reported. To be operated under 18-year charters, those vessels have the potential to contribute almost $1 billion in additional gross contracted cash flow.
The strength of the strategy is demonstrated by the fact that Seaspan reported a better than 98 percent utilization in the quarter. The result was a better than 11 percent increase in adjusted EBITDA to more than $250 million for the quarter and a 15 percent increase in funds from operations producing more than $194 million for Atlas.
Atlas recently confirmed that it has received a take private offer from its largest shareholders who are being joined by Ocean Network Express. ONE is Seaspan’s largest customer chartering a quarter of Seaspan’s total fleet. They proposed to buy the remaining third of Atlas’ outstanding common shares not currently controlled by Fairfax Financial Holdings, the Washington Family, and company chairman David L. Sokol. In addition to immediate liquidity and certainty of value at a significant premium to the current share price, the group said their proposed transaction would further allow Atlas to focus on the long term without the emphasis on short-term results. The board of directors has appointed an independent committee to review the offer and make recommendations.