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Tuesday, March 21, 2017

Rickmers will have a hard time to restructure its loans.

Brilliant analysts will know that the shipping industry cannot withstand economic downturns.  Many shippers will renege on its long-term chartering contracts with shipping trusts during economic downturns because many shippers cannot survive the downturns and have to downsize.  Shipping trusts can't do anything or sue their customers because their customers won't use shipping reits anymore if they get sued.

When shipping trusts are losing customers and ship values are declining simultaneously, banks will demand the shipping trusts to top up the difference in ship values or recall the ship loans.  Therefore, it's very difficult for the shipping trusts to restructure their loans unless creditors are willing to take heavy writedowns.

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