b4mbi

On the face of it it's worthy of further investigation. However when you look at the numbers being talked about it requiring, it makes even the ardent optimist sceptical. 5 years payback on £50m investment is clearly nonsense, and I think has been mis-reported by MR and papers as they got the wrong end of the stick. Max Power absolutely right in that it can't be looked at in isolation as it would act as a catalyst for many other opportunities across a number of different sectors. I apologise in advance for the bloat that will follow, but hopefully it will clarify with some facts...

As opposed to all the things to do in the Orkney Islands (pop. 22,000) , who have confirmed bookings of 145 cruise ship visits this year, bringing 120,000 tourists... and have had to turn away business as they don't have the berth available and have pretty much 2018 booked out as well... I have to declare an interest here in the deep water berth project, and will elaborate later as it seems there are a few misconceptions about the proposal that have been misreported.

Insufficient draft at Peel to berth cruise ships, likewise Ramsey & Port Erin. Need 10m low water depth minimum - only place for that is Douglas outside Alexandra Pier. If you don't have that depth, you restrict what vessels can come and cruise ships only getting bigger. To maximise potential, vessels need to berth, tendering no good for the cruise demographic, nor for the cruise liners. A usual port call is 10hrs or so plenty of time for excursions to the other towns (and city) and all they offer..

chaplin

On the face of it, it is incomprehensible that planning has been refused for this site by CoMin. Do they have people queuing at the door with better alternatives? I accept that I am not in possession of all of the facts, but on the face of it they should be biting the arm off someone that was willing to risk significant capital to regenerate a decaying building and area. What do CoMin think would be more suitable there? a morgue? It really has made me unusually angry this decision.

sorry to be pedantic, but I thought it was Icelandic...

I saw Saturn in my telescope for the first time last night... wooooow!! Incredible to see it with your own eyes.... 401years after Gallileo first viewed the ring system

Baldrick is not playing Woodward, Woodward is the new Magarby and the link span on the vic is the property of the steam racket. wtf is Magarby? but the other linkspan isn't.....

IOMSPC have *increased* freight rates?! A brilliant strategy, designed to completely bamboozle the customers and to outfox the competition. I think Baldrick must have infiltrated the board meeting and informed them that he has a cunning plan. Does anyone else think "pot and kettle" when the main thrust of the Unions arguments is "unfair competition" ? Having an exclusive agreement for usage of both linkspans *isn't* unfair competition apparently.....

Andy, I think you're misreaading the situation. It is the owners (shareholderes) that are over a barrel to their financing banks, and stand to lose their investment. Only problems this creates for IOMGov is the electorate's expectation of cheap, regular and reliable passenger/vehicle sailings. If IOMSPC stick to the minimum terms of the UA in an attempt to save costs, then inevitably this will lead to price increases and frequency decreases. Of course, depends on what fares the UA allows IOMSPC to charge. If that is too much, then IOM Gov have problem as they will face pressure from electorate to "do something" I think the market will sort this one out, most likely with IOMSPC being purchased at a bargain price by new owners, in conjunction with a re-writing of the UA which would provide transparency in terms of pricing and returns to investors.

They've written off the value of the investment??

Why don't you purchase it from the Companies Registry?

Agreed, but what can they negotiate? The Gov't can't give them a monopoly on all freight/pax into Douglas. What sort of message would that give out? Plus Gov't would be wide open to a commercial damages claim from Mezeron. Maybe reduced level of minimum acceptable services, but of course Gov't would want something in return such as reduced prices. Either way, revenues are down for IOMSPC, but just depends how much they can save by not running certain services against loss of income from reduced prices. In either case, I think it's unlikely to cover the estimated £6-7m revenue losses. Once again, depends on figures!

welcome Andy Onchan. A trawl through all 85 pages on the subject should give you a good insight! IOMSPC as a entity in itself will most likely be able to meet its ongoing financial obligations, depsite the loss of the freight contracts, and be still able to meet the minimum terms required of it by the UA. (May mean reduced services and increased prices for passengers) The problem is with the parent company as it looks like they might not be able to meet their financial obligations to the financing bank, who provided the finance for the owners to purchase the IOMSPC in the first place. If this is the case, then the financing bank could make demands on the IOMSPC (through the various guarantees and securities given by IOMSPC to the financing bank) which would mean that possibly the IOMSPC could not meet even the minimum terms of the UA. As long as IOMSPC can fulfil the minimum terms of the UA, there shouldn't be a need for Goverment to revise the agreement. However, if the Goverment perceives that the minimum level of services provided by the UA is not sufficient for its public, then that's another matter, and possibly a reason why they may want to revise the agreement. When you say "are there no reserves?" , if you mean is there a pot of cash sitting in IOMSPC to deal with these issues, then no. It appears all spare cash has been dividended away to the parent company over the course of the last few years. Of course, I'm not the Finance Director of IOMSPC and the exact figures are not in the public domain, but from published information regarding the situation, this is my opinion of the state of affairs.

Plus, what would be Mezeron's incentive for agreeing to transfer anything to IOMSPC?! A big dolop of cash? That the IOMSPC can't afford? Freedom to Flourish (except if you upset the status quo, then government won't like it and will force you to sell up a perfectly viable business)

Arghhh. No No No No No. Worst idea ever.

Probably not that unusual as the auditors may have wanted something in writing before they would sign off on a going concern basis. Frequently it is the case if it is a related company loan or where they may be a technical breach in a covenent or if the terms are due being renegotiated. Highly likely, yes.

It is a very difficult question to answer in that the directors have a fiduciary responsibility to the shareholders. If the shareholders decide on X course of action then I believe they can instruct the directors who can either accept or resign. Just like any director could if outvoted on a matter in the boardroom. I once had to take legal advice on this as the shareholders were instructing me to take a particular course which I and the board did not agree with. I have to admit I was quite surprised to be advised that the directors could be instructed by the shareholders as I thought at most they could remove us. I cannot remember what the consequences were if we did not follow the advice as it was several years ago and as a board we resigned What would I do in the position of the CEO of SP, well in reality you are little more than a paid employee with a grand title retained to run the operational side. With a family to look after a mortgage to pay would you resign on such a point knowing in would not make a jot of difference. You also might take the view that why you might disagree with the action by staying in place you are the best person to mitigate the consequences. This is why I dislike a lot of the personal criticism of MW as he is in my opinion little more than a well paid employee of the SP. He may deserve criticism on certain points but much of what he gets criticised over he probably absolute no control over. Basically he is the operations director who manages the course of the ship he does not set the course of the ship. Now I am only guessing much of this but from experience I really cannot see the guys who ultimately paid £200million for the SP not having their hands on the tiller. totally agree on this well made point. Of course, the guys who bought it financed the aquisition with debt (and their own equity, £52m per balance sheet IOMSPC 31/12/08) If it gets to a situation where the shareholders are unwilling to provide further equity or guarantees to the bank if the terms of the loan agreement cannot be fulfilled, then the bank could in practise have their hands on the tiller cause they could force administration on the group by calling in their loan Note 21 of the 2008 accounts is very interesting, as the day they received the letter of waiver surrounding certain terms on the loan agreements is the same day the directors signed the accounts. It's not totally clear whether the margin they are paying is 1.8% or is it 8% (ouch) ??? (would expect it's 1.8% above libor) Also note that the amended term which strongly suggests that the bank has already stopped the group from making external dividends payments to shareholders (meaning that the Australians won't be getting ANY returns on their investments from 28/08/2009 onwards.....) Looks like the bank are already pulling the strings....

I'd really like your opinion on the points you raised above: What you say about the CEO and Local Directors not having a say on the borrowing and financial decisions - If you were CEO or a Director of a similar company and the company of which you were Director was being deluged in debt that was going to jeopardise the long term stability of the company, would you remain as a Director or CEO? Bear in mind that in law, Directors have clearly defined responsibilities... I most certainly wouldn't and given that I was good enough to get to the position of Director or CEO, I would be very confident that I would land a job of equal status quite easily. I think you both have valid points. In practise, I suspect the bones of what happened was that the local directors were heavily influenced by the ultimate parent representatives (professional advise from Maqu related company, what were all those fees for??)) into accepting the deal for the debt and of course at the time (when collectively all parties hadn't realised that the UA wasn't watertight) they possibly quite reasonably assumed that the business was sustainable this way. However, I *think* the facility was very recently refinanced, very close to the time of the announcement of the competition. It is at this point the directors of the MIOM and IOMSPC should have realised that the business model was not sustainable and been offering all sorts of objections etc. Practically speaking however, would you bite the hand that feeds you? What real alternative did local directors have other than to accept refinancing? Were they going to declare insolvency of MIOM and put it into administration??

Is is different in the sense of whose balance sheet the debt sits on, but importantly, the directors of the parent company were/are directors of IOMSPC. Therefore the same management and control for both companies, which means your analogy is flawed. I've not seen either document but would hazard an educated guess that the IOMSPC directors who signed the UA were the same as the ones who also signed the loan agreement for the parent. As posted before, it is the shareholders, management of group and bankers that must take blame for misinterpreting the UA, falsly believing it to give the group exclusivity of containerised and ro-ro freight transportation to the Island. So I agree that the bank and the owners are the ones facing losses. As you say, without knowing the figures everything is just speculation, but £200m @5% = £10m p.a. in interest costs alone.... not even a suggestion of capital repayment of the loans. IOMSPC profit (with no loss of freight contracts) for y/e 31/12/2008 was £9.8m (2007: £14.8m) Alternatives: 1) further injection of capital from shareholders to enable partial / full debt repayment to give company opportunity to compete on prices. 2) write off of part of loan from bankers in conjunction with sale of business. Can't really see shareholders (professional investors just looking for returns) injecting more capital, so most likely outcome within the medium term in my view is a sale.

It is ridiculous to suggest that the debt is partly a red herring. The debt and the UA are the major reasons for the current problems that IOMSPC find themselves in!!!! The only difference being who would force the company to fold and who picks up the cost. The debt basically means the shareholders have already been paid out and it is the banks that need the return. If there was no debt then the shareholders would be demanding a return. I see both as two different Mistresses. Debt just like shareholders equity is a way of capitalising a company and in my view those who capitalise the company basically want the same result. I do not have a rose tinted view that just because there are only shareholders as stakeholders they will not take an equally hard nosed line as the banks if the returns are not there. I see why you think that, but there is IMO a fundamental misunderstanding on your part between debt and equity financing. Debt is (or should be) secured, ordinary equity is risk capital. i.e. investors (shareholders) are fully aware that if the venture is unsuccessful, they can lose all of their equity. Shareholders can't demand a return. Shareholders would expect a return, but these are two very different statements. It is the Directors of a company that determine if the company is able to make a divdend payment from its current profits and/or retained reserves. It is illegal to pay dividends that would put a company into a balance sheet net deficit situation. If the returns shareholders were getting were not meeting expectations, the only recourses they have are to force a change in management of the company (given sufficient voting power) or they could sell their shares (if they found a buyer). They certaintly can't demand their investment back. The debt does not mean "the shareholders have already been paid out" In the particular case we are talking about, the directors (who are/were the same as the parent company who holds the debt) declared sufficient dividends from IOMSPC that just so happened to cover interest payments on the parent company's debt, and make a suplus in the parent company, which was then dividended further up the group to the ultimate investors (after Maqu took significant "management & administration & advisory charges") Net effect, shareholders equity remains in IOMSPC (to tune of approx £53m IIRC) y/e 2008. There is no way the divdends paid out will have returned all the invested capital (£53m) to the shareholders as there just won't have been enough remaining dividend (Annual turnover of IOMSPC is only just more than £53m IIRC) Very different scenario to debt financing, which if is not repaid, and the securities are called in by the lender, could lead to insolvent liquidation, as the group does not generate sufficient income to repay interest on the debt (let alone capital).

It is ridiculous to suggest that the debt is partly a red herring. The debt and the UA are the major reasons for the current problems that IOMSPC find themselves in!!!!

If I were IOMSPC, I'd save the SS Manxman, redo her to top luxury standard (but in classical 30's style), then market nostagic tours around coastal Britian, linking up with a Pullman Service pulled by the A3 Peppercorn Steam Locomotive "Tornado" to offer a park, sail then return rail luxury round trip. £10m would do it, with some spare for subsidy of operating costs. People love nostalgia and will pay for it. whether or not it would be profitable is anyones guess.... but I'd love to see it

Yes agreed, for the current size of operations required by the Isle of Man, you have to think that Ro-Ro is the more efficient method, but then again, don't know what crane/ gantries are used to load the Mezeron vessels in Liverpool... Exactly, IOMSPC managment have been caught with their pants down and don't seem to be making great moves (at least in public) to pull them up.

errr...yes they do...and then again some places have somewhat less sophisticated arrangements: hardly comparable vessel sizes tho!! looks like around a 1800TEU vessel compared to 266TEU vessel!!!! of course you need different gantries / cranes!