Wellard sells Ocean Shearer for $77m

Wellard sells Ocean Shearer for $77m

Live Export
The MV Ocean Shearer in 2016 when it was first launched by Wellard. The vessel is the largest purpose built livestock carrier in the world and has been purchased by Kuwait Livestock Trading and Transport for $77 million.

The MV Ocean Shearer in 2016 when it was first launched by Wellard. The vessel is the largest purpose built livestock carrier in the world and has been purchased by Kuwait Livestock Trading and Transport for $77 million.

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Kuwait Livestock Transport and Trading (KLTT) has surprised the live export industry by purchasing Wellard's MV Ocean Shearer, the world's biggest purpose-built livestock vessel, for $US53 million ($77m).

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KUWAIT Livestock Transport and Trading (KLTT) has surprised the live export industry by purchasing Wellard's MV Ocean Shearer, the world's biggest purpose-built livestock vessel, for $US53 million ($77m).

Wellard made the announcement last week that it would proceed with the transaction "in absence of a superior offer" and it had signed a Term Sheet to sell the vessel, which would complete the company's recapitalisation program on successful closure of the transaction anticipated to be completed before the end of March 2020.

"The sale of the MV Ocean Shearer cuts Wellard's financial debt to very manageable levels while crystallising value from an under-utilised vessel in our fleet," said Wellard executive chairman John Klepec.

Wellard said the agreed price was slightly higher than the consolidated net book value of the vessel and the vessel would be treated as an asset held for sale when the company's interim accounts were lodged in February, 2020.

Mr Klepec said Wellard was paying about $11.7m in principal and interest costs on the MV Ocean Shearer annually, in addition to various other fixed costs such as maintenance and crewing.

"Given our comparable sized vessel, the MV Ocean Drover has completed three times the number of voyages as the MV Ocean Shearer in 2019, it makes financial sense to release value and reduce debt from an under-utilised asset, adding $15.8m to our cash reserves and reducing our annual debt servicing by $11.7m," he said.

Mr Klepec said the company's high debt load, which had become a millstone around its neck, would be consigned to history on the successful settlement of the transaction.

"Wellard can now focus on charter utilisation and running its vessels efficiently," he said.

"Our company has changed its approach and has become an international livestock logistics business, with more robust systems and processes, best-in-class animal welfare outcomes, a leaner overhead structure and a more reliable revenue stream from its highly specialised charter operations."

Mr Klepec said it had been the biggest vessel in Wellard's fleet, but had been "consistently underutilised in the current very volatile environment".

"It has been predominantly deployed in the South America-Turkey trade route, which has twice been closed suddenly, leaving Wellard with fixed financing and overhead costs but without revenues," he said.

"KLTT's purchase offer represents a significant de-risking of Wellard's business and allows the company to concentrate on the three remaining more economically attractive vessels, being the Ocean Drover, the Ocean Ute and the Ocean Swagman.

"KLTT will deploy the Ocean Shearer to the Australia-Middle East trade route, which I am pleased to note will likely be an ongoing benefit to Western Australian farmers and other businesses in the related supply-chain."

The sale is subject to final documentation under the Norwegian Shipbrokers' Association's Memorandum of Agreement for Sale and Purchase of Ships (BIMCO Form Rev, 2012), which provides standard terms and conditions adopted internationally for sale of oceangoing ships and is subject to standard conditions precedent including final vessel inspections.

KLTT is one of the biggest exporters of Australian sheep to the Middle East.

Due to the delay of its $100m state-of-the-art, purpose-built livestock carrier, which is still in a Croatian shipyard, KLTT has been limited in its vessel utilisation from Australia, even chartering where needed.

The Australian Maritime Safety Authority's Marine Order 43, which requires a phase out of twin-tiered livestock vessels from Australian waters by January 1, 2020, with recent exemptions allowed in the short-term if exporters could show they were working to meet the requirements, would have affected KLTT's Al Shuwaikh.

Rural Export And Trading WA general manager Mike Gordon said he was unaware of KLTT's purchase of the vessel at the time of the announcement.

A KLTT spokesperson said the company was "pleased to be acquiring the Ocean Shearer livestock vessel to be used for the Australian supply chain".

The sale of the vessel and payment of Wellard's Intesa loan would also remove the remaining "key-man" restrictions relating to the Balzarini family.

Accordingly, parties owned or controlled by former Wellard chief executive officer Mauro Balzarini would no longer be required to hold a minimum 12.5pc shareholding in Wellard Limited.

Wellard has been advised that when this restriction is lifted, creditors associated with Mr Balzarini's private interests would take possession of the majority of those previously restricted shares.

Mr Klepec said Wellard had no influence over the timing and execution of that transfer.

and an appropriate announcement would be made in due course.

The story Wellard sells Ocean Shearer for $77m first appeared on Farm Online.

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