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Vanguard Shipping sells assets to DIP lender

by Hayley Kaplan | Published July 25, 2012 at 2:00 PM

Vanguard

Shipping (Great Lakes) Ltd. has sold substantially all its assets and those of affiliate Vanship Ltd. to an affiliate of debtor-in-possession lender T.F. Warren Group Inc.

Judge Geoffrey B. Morawetz of the Ontario Superior Court of Justice in Toronto on July 18 signed an order approving the sale of the debtors' assets, including two vessels, to 8219222 Canada Inc. -- an entity controlled by Terry Warren.

His T.F. Warren is a 50% shareholder in Meridian Credit Union and Roynat Inc., the postpetition lenders to the St. Catharines, Ontario, marine freight shipping companies.

According to a July 18 report from Ernst & Young Inc., monitor in the debtors' Companies' Creditors Arrangement Act proceeding, T.F. Warren purchased substantially all of Vanguard's assets including its vessel, the J.W. Shelley, for a total purchase price of C$11.44 million ($11.22 million). The purchase price includes the assumption of most of the debtor's liabilities, including Vanguard's C$9.6 million debt to Meridian, its C$761,000 debt to T.F. Warren, and other priority and administrative claims.

T.F. Warren deposited C$53,500 toward the purchase.

T.F. Warren also purchased substantially all of Vanship's assets, including its VSL Centurion vessel, for a total purchase price of C$8.32 million. The purchase price settles the debtor's C$5.77 million debt to Roynat, administrative claims and other liabilities.

T.F. Warren deposited C$30,000 for the assets.

Both of the debtors' ships transport grain through the St. Lawrence Seaway system but aren't operative during the winter months due to the annual closure of the seaway. Both ships operate under long-term contracts with a single customer.

Justice Peter Cumming of the Toronto court on May 1 approved Vanguard's request to sell its two shipping vessels.

According to an April 25 monitor's report outlining the solicitation procedures for the sale of the vessels, qualified offers were due between June 22 and July 9, which the monitor then evaluated based on a series of criteria. The monitor then recommended the most favorable offer or offers, which the debtor then selected between.

E&Y received three offers for Vanguard's assets, two of which the monitor ultimately deemed qualified. The monitor received two offers for Vanship's assets and deemed only Warren's bid qualified.

Vanguard and Vanship filed for CCAA protection on March 21.

The companies own and operate marine carriers that transport bulk cargo between ports throughout the Great Lakes and the St. Lawrence Seaway. The company's two vessels required C$1.16 million in repairs.

The J.W. Shelley is a 222-meter (about 728 feet) bulk carrier vessel, while the Centurion is a 176-meter vessel.

The debtors in court papers blamed the CCAA filing on a "substantial and potentially fatal liquidity crisis." Many other shipping companies have filed for bankruptcy protection recently, citing a decrease in freight volume and rates.

The company could not pay its debts as they become due, court filings said.

Since filing for CCAA protection, Vanguard has secured two DIP loans from Meridian and Roynat, which total C$2.45 and C$2.6 million.

Vanguard listed C$11.4 million in assets and C$10.72 million in liabilities. Vanship listed its assets at C$10.73 million and its liabilities at C$10.87 million.

Vanguard has a range of five to 25 employees, depending on the time of the year, while Vanship's head count ranges from two to 20.

Gregory Azeff of Pallett Valo LLP is debtor counsel.

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Tags: Judge Geoffrey B. Morawetz | T.F. Warren Group Inc. | Vanguard Shipping (Great Lakes) Ltd. | Vanship Ltd.

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Vanguard Shipping sells assets to DIP lender

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