When an industry shake-up threatens survival

The past several years have been tough for the container-shipping industry because shrinking demand and overcapacity are pushing freight rates to new lows. The owner of a fleet of deep-sea container vessels was struggling to adapt to the new economic environment after benefiting from a number of long-term, above-market charter contracts secured in earlier, brighter times. But those contracts were rolling off, and as they did, cash flow from operations had started to dwindle.

Management engaged with various lenders to explore restructuring options. But as the company’s liquidity crunch worsened, it called in AlixPartners to work with other advisors to evaluate strategic alternatives and carry out a restructuring.

Careful preparation and coordination set the stage for recovery

We served as the chief restructuring officer and guided the company’s senior management through the restructuring process. Our team began its work by outlining a number of strategic options the company might consider before opting for Chapter 11. The team also prepared first-day motions for deployment in the event of a bankruptcy filing.

In addition, our team evaluated the company’s near-term liquidity situation and built a plan to make sure the company had enough liquidity to execute a restructuring. Collaborating with the other external advisors, we participated in restructuring negotiations and developed a reorganization plan. Our work involved creating a financial projections model that the company would use during parallel discussions with separate secured-lender groups. We also coordinated with legal counsel to finalize the reorganization plan and disclosure statement.

When it really matters

Our efforts paid off. The company was able to retain operational control during the Chapter 11 process, which bought critical time for negotiation with lenders and for the design of a viable restructuring plan. What’s more, thanks to the careful, up-front planning and coordination with charterers and vendors, the company was able to run its business as usual during the Chapter 11 process—with no significant disruptions.

Ultimately, all of the secured lenders agreed to a reorganization plan. The plan called for the company to retain outright ownership and management of most of its vessels, thereby providing ownership with a foundation for future growth when industry conditions improved. Management also became able to retain interests in other vessels and receive a cash payment for transferring some vessels to lenders. For the vessels that the company retained full ownership of, AlixPartners was able to extend maturities of the loans. Less than a year after agreement on the plan, the company successfully emerged from Chapter 11.