CH Offshore

[Nick]

Any buddies here have any data on their fleet charter profile ? Not very certain if it is largely spot charters or are most of the fleet backed by charters and if so, are they at over-priced pre crisis rates ?

IIRC they only have 1 spot charter boat and 1 docking for servicing. the rest are on long term charters. As for recovering the receivables I think you should kiss it goodbye. Venezuela is a bankrupt state and getting worse by the day. Try suing a bankrupt and you get a moral victory but still unable to recover your debts. worse is if you end up paying all the legal bills.

The way to see CHO is treat it as a FD at 5% dividend yield and wait for the charter rates cycle to go up for a rerating and then you can unload the shares. Currently the charter rates are firming but can also fall off anytime if oil price collapse....if Iran has a nuclear deal and flood the mkt with their oil.

If I recalled correctly, they arrested PDVSA vessels and released it after PDVSA made US$70 million payment to the Court as security payment. So a victory should imply a cash gain assuming they get the security deposit ?

(Not Vested)

[Jacmar]

If I recalled correctly, they arrested PDVSA vessels and released it after PDVSA made US$70 million payment to the Court as security payment. So a victory should imply a cash gain assuming they get the security deposit ?

(Not Vested)

Yes you are correct but this does not mean that they will get the money even if there is a victory. Venezuela owes many companies money including some of the oil majors. They will also want to be in line for whatever money is available. Like in all bankrupt case, all creditors will get a share of the spoils. In this case CHO debt is miniscule in comparison to the others.

[cfa]

In this case CHO should just write off this debt , believe the auditor should agree knowing the situation of the debtor. Why spend good money after bad money ?

[GreedandFear]

If I recalled correctly, they arrested PDVSA vessels and released it after PDVSA made US$70 million payment to the Court as security payment. So a victory should imply a cash gain assuming they get the security deposit ?

(Not Vested)

Yes you are correct but this does not mean that they will get the money even if there is a victory. Venezuela owes many companies money including some of the oil majors. They will also want to be in line for whatever money is available. Like in all bankrupt case, all creditors will get a share of the spoils. In this case CHO debt is miniscule in comparison to the others.

I don't think this statement is correct. Perhaps you are confusing Venezuela with Argentina ? Argentina did default on its debt and the creditors that refused to agree to the unfavorable debt restructuring terms have, indeed, been chasing Argentine assets around the world. However, PDVSA has substantial amounts of USD debt outstanding and has never defaulted. The bonds are high yielding but current. Hence, should CH prevail in the courts, I would expect it to be paid and that could be positive for the stock price. The issue that I have with CH is the lack of clarity as to who they have charted out the vessels to, at what rate and for how long. Without that info, it is difficult to properly assess the company.

(Not vested)

[GPD]

Some analysts are toying with the idea of Falcon buying up CHO. CHO by itself doesn't seems very exciting but the combined Falcon/CHO should strengthen Falcon's BS and earnings.

Hope they can recover the money but the trial against PDV Marina is another year from now. A year at least for this re-rate, if any.

The new SGX announcement website very cock-up. If you select CHO under "company name" for the last 3 month, you only get 2 out of the 4 announcements then if you were to select "security name" because CHO latest company name is "CH Offshore LTD." and not "CH Offshore LTD". I have already encountered a few errors with the revamp. Pretty hopeless.

[Jacmar]

In this case CHO should just write off this debt , believe the auditor should agree knowing the situation of the debtor. Why spend good money after bad money ?

They already wrote this off and took a hit in the last FY earnings.

[Jacmar]

I don't think this statement is correct. Perhaps you are confusing Venezuela with Argentina ? Argentina did default on its debt and the creditors that refused to agree to the unfavorable debt restructuring terms have, indeed, been chasing Argentine assets around the world. However, PDVSA has substantial amounts of USD debt outstanding and has never defaulted. The bonds are high yielding but current. Hence, should CH prevail in the courts, I would expect it to be paid and that could be positive for the stock price.

(Not vested)

You are correct that Venezuela has not defaulted on their bonds yet but it's a matter of time. So now it's the creditors that is trying to seize their assets to pay off and once V defaults, then it will be bond holders taking their turns to seize their assets. Creditors debt is subordinate to bond holders and creditors will get nothing when the time comes. as for the creditors they will file a court injunction of whatever money is available. the court cannot arbitrarily gave the money to CHO as there are many creditors in line. CHO will have to fight off all these other creditors too. In the end whatever money is available will be diffy up and how much CHO can claim will be small. after that go and seize more assets.

quote:The issue that I have with CH is the lack of clarity as to who they have charted out the vessels to, at what rate and for how long. Without that info, it is difficult to properly assess the company.

This is company confidential info. who would let their competitors know who their customers are, at what rates they charter and when it's maturing. Competitors will come in like a hawk when it's time for renewal. However if you attend the AGM they will give a hint as to roughly what is their average charter rates and the average maturity period of their overall fleet.

[cfa]

In this case CHO should just write off this debt , believe the auditor should agree knowing the situation of the debtor. Why spend good money after bad money ?

They already this off and took a hit in the last FY earnings.

What I meant was the management should know CHO will get back the money if they win the court case, otherwise why waste legal costs on a case which no chance of getting back the money even the judgement could be in their favor.

[Jacmar]

Some analysts are toying with the idea of Falcon buying up CHO. CHO by itself doesn't seems very exciting but the combined Falcon/CHO should strengthen Falcon's BS and earnings.

This is what Falcon wants but not what Jimmy Peh wants unless he can get a very good price. the last time Falcon paid $0.70 for their purchase of CHO shares from Scomi. Do you think JP wants to sell for anything less?? Falcon is in no position to cough up to that price given their stretch b/s. JP also wouldn't want a merger as he wouldn't want to exchange his clean b/s CHO with a stretch falcon b/s and loose control in the process. again if the price is right, who knows. I don't hold this as a possibility. a more likely scenario is CHO is taken over by another entity as right now there is hardly any synergy between CHO and Falcon.....maybe the party that bought Jaya or Nam Cheong???

[GreedandFear]

I don't think this statement is correct. Perhaps you are confusing Venezuela with Argentina ? Argentina did default on its debt and the creditors that refused to agree to the unfavorable debt restructuring terms have, indeed, been chasing Argentine assets around the world. However, PDVSA has substantial amounts of USD debt outstanding and has never defaulted. The bonds are high yielding but current. Hence, should CH prevail in the courts, I would expect it to be paid and that could be positive for the stock price.

(Not vested)

You are correct that Venezuela has not defaulted on their bonds yet but it's a matter of time. So now it's the creditors that is trying to seize their assets to pay off and once V defaults, then it will be bond holders taking their turns to seize their assets. Creditors debt is subordinate to bond holders and creditors will get nothing when the time comes. as for the creditors they will file a court injunction of whatever money is available. the court cannot arbitrarily gave the money to CHO as there are many creditors in line. CHO will have to fight off all these other creditors too. In the end whatever money is available will be diffy up and how much CHO can claim will be small. after that go and seize more assets.

quote:The issue that I have with CH is the lack of clarity as to who they have charted out the vessels to, at what rate and for how long. Without that info, it is difficult to properly assess the company.

This is company confidential info. who would let their competitors know who their customers are, at what rates they charter and when it's maturing. Competitors will come in like a hawk when it's time for renewal. However if you attend the AGM they will give a hint as to roughly what is their average charter rates and the average maturity period of their overall fleet.

Hi Jacmar.

Whether PDVSA or Venezuela will default is something that each investor will have to decide on his own but I will point out that :

(1) even if Venezuela defaults, that does not mean that PDVSA will automatically default. When Russia defaulted in 1998, Gazprom did not default. It was business as usual.
(2) At current oil prices around $100, PDVSA should be in reasonable shape.

Bankruptcies do get messy and you are correct in pointing out that they trigger mad scrambles by different creditors as they try to position themselves to minimise their losses. However, your statement that bondholders rank senior to other creditors is incorrect. Very few international bonds are secured (in which case they would rank senior) and unsecured bonds would rank equal to other unsecured creditors. Where would CH's legal claim rank ? I am not a lawyer but if CH seized a PDVSA vessel to satisfy its legal claim and the court then subsequently ruled that this vessel could be exchanged for a cash deposit as security, then it seems to me that CH would have a reasonable shot at ranking as a secured creditor ahead of any future creditors if indeed PDVSA were to go bankrupt (which it is not but which is your scenario). In a worst case scenario, it would be an unsecured creditor. Note that if CH's claim is secured, then it has first dip on its security. In most jurisdictions, collateral is not commingled with other secured creditors (Korea being a glaring exception) but goes first to whoever has the legal claim to it.

I agree that there may be competitive reasons to not reveal too much info about their contracts but, as I said before, it does make it difficult to analyse and negative surprises (like this dispute with PDVSA) do arise...