Seaspan announced its financial results for the quarter and year ended December 31, 2019.
Financial and Operation Highlights
Executed agreements to acquire three 10,700 TEU and three 9,200 TEU containerships on long-term charters; increasing, on a fully delivered fleet basis, Seaspan’s contracted revenue to $4.3 billion and average remaining contract term to 4.2 years
Achieved Vessel Utilization of 99.1% for the fourth quarter and 98.9% for the full year; highest since the year ended December 31, 2014
Operating earnings of $116.5 million for the fourth quarter and a record $687.0 million for the full year, which included $227.0 million of income related to the modification of time charters
Cash flow from operations of $137.8 million for the fourth quarter and a record $783.0 million for the full year
Earnings per diluted share of $0.24 for the fourth quarter and $1.67 for the full year; changes in fair value of financial instruments contributed a gain of $0.01 per diluted share for the fourth quarter and a loss of $0.16 per diluted share for the full year
Comments from Management
Bing Chen, President and Chief Executive Officer (“CEO”) of Seaspan, commented, “2019 follows 2018 as another year of achievement and transformation for Seaspan. Our commitment to providing a best-in-class integrated platform focused on delivering long-term value for our stakeholders resulted in record performance across our key financial and operational metrics. Starting in 2018, we set out with a clear strategy focused on five key priorities, and as demonstrated by our results, our relentless execution has benefited all of our stakeholders. We’ve built a strong team equipped with core competencies to continue growing the container-shipping franchise and beyond. The proposed holding company reorganization to form Atlas Corp. is expected to provide us, as asset managers, with a solid foundation to expand our core competencies into power via the acquisition of APR Energy while augmenting our commitment to the container-shipping industry and customers. As we enter the second quarter of 2020, we believe that we are uniquely positioned to build on our strong momentum through a continued focus on our five key priorities.”
Ryan Courson, Chief Financial Officer (“CFO”), added, “Over the course of the last two years we have made significant improvements across our capital structure adding $500.0 million of equity, restructuring nearly $2 billion of secured debt into an innovative portfolio financing program, and increasing our balance sheet flexibility by adding a total of $450.0 million of liquid revolving credit capacity – with the long-term goal of achieving an investment grade credit rating. While focusing on strengthening our credit profile, we have also invested $2.2 billion of capital into high quality shipping assets, which has materially improved our long-term cash flow profile. We will continue to invest capital to create long-term value through the Atlas platform which we expect to be finalized by March, and we are very excited about the opportunities in front of Seaspan and APR.”
Significant Developments in the Fourth Quarter and Subsequent Events
Acquisition of Six High Quality Containerships
In November 2019, Seaspan entered into an agreement to purchase a fleet of six containerships for approximately $380 million in cash. Pro-forma to this acquisition, Seaspan’s fully delivered global fleet of 119 vessels will reach approximately 975,000 TEU, representing a global market share of 7.7%(1), as measured by TEUs. Five of the six vessels were delivered in the fourth quarter, with the sixth vessel delivered on January 24, 2020.
Portfolio Financing Program Increased
In December 2019, Seaspan increased the committed amount under its portfolio financing program (the “Program”) by $155.0 million. In February 2020, Seaspan expects to further increase the committed amount by $70.0 million to a total of $1.725 billion. The Program provides flexibility to continuously expand up to $2.0 billion. For further information regarding the Program, please refer to our quarterly reports on Form 6-K for the quarters ended June 30 and September 30, 2019 which were furnished to the U.S. Securities and Exchange Commission on August 14 and November 18, 2019, respectively
(1) Based on data from Alphaliner Monthly Monitor (October 1, 2019); includes all vessels Seaspan has agreed to purchase.
Repayment of Total Borrowings
During the quarter ended December 31, 2019, Seaspan repaid borrowings in respect of four vessels, totalling $266.2 million, using proceeds from the Program.
Formation of New Holding Company, Atlas Corp.
In November 2019, Seaspan announced a proposed holding company reorganization to form Atlas Corp., a new global asset management platform. The proposed reorganization will be implemented through the merger of Seaspan and an indirect, wholly-owned subsidiary, with Seaspan continuing as the surviving corporation and a direct, wholly-owned subsidiary of Atlas Corp. The proposed reorganization is expected to advance the commitment of the Board of Directors and management to thoughtful capital allocation and diversification of cash flows through professional asset management. Bing Chen will be CEO and Ryan Courson will be CFO of Atlas Corp., as well as Seaspan.
Acquisition of APR Energy Limited
In November 2019, Seaspan announced the proposed acquisition of APR Energy Limited (“APR”), a global leader in fast-track, mobile power solutions, in an all-stock transaction valued at $750.0 million, including the assumption of debt, for an expected equity value at closing of approximately $425.0 million using shares of Atlas Corp. valued at $11.10. APR is a global leasing business that owns and operates a fleet of specialty assets (gas turbines and other power generation equipment) that provide power solutions to customers including large corporations and/or government backed utilities. APR focuses on maintaining high asset utilization through medium-to-long-term contracts to optimize cash flows across its asset portfolio. APR, like Seaspan, is a global leader in its asset class and offers a unique integrated platform to both lease and operate its assets.
Termination of Investment in Swiber Holdings Limited
Effective January 1, 2020, Seaspan’s investment agreement with Swiber Holdings Limited was terminated due to certain conditions’ precedent not being met.
Delisting of Seaspan Securities in Connection with Reorganization
In announcements made on January 17 and February 14, 2020, Seaspan announced its intention to delist its outstanding 5.50% senior notes due 2025 (the “2025 Notes”), 5.50% senior notes due 2026 (the “2026 Notes”) and 7.125% senior unsecured notes due 2027 (the “2027 Notes” and together with the 2025 Notes and 2026 Notes, the “Notes”) from the New York Stock Exchange (the “NYSE”) and to deregister the Notes under the Securities Exchange Act of 1934, as amended. The last day of trading of the Notes on the NYSE is expected to be Monday, March 9, 2020. Seaspan also announced its intention to exercise its option to redeem the 2027 Notes on October 10, 2020, the first date for early redemption, at par plus accrued and unpaid interest to, but not including, such redemption date.
On January 28, 2020, the 2025 Notes and the 2026 Notes were admitted to the official list of Euronext Dublin and are currently trading on the Global Exchange Market, the exchange regulated market of Euronext Dublin.
The Board of Directors declared a quarterly distribution in the amount of $0.125 per share for its Class A Common Shares, paid on January 30, 2020 to shareholders of record as at the close of business on January 20, 2020. Regular quarterly dividends on the Preferred Shares Series D, Series E, Series G, Series H and Series I were also declared.
Recent Additions to Senior Management
In February 2020, Seaspan appointed Karen Lawrie as General Counsel.
Class A Common Shares Outstanding
As of February 18, 2020, there were 215.9 million Class A Common Shares outstanding.