Sea Containers to issue restructuring proposal to creditors in next few weeks

By Caroline Salls

Pittsburgh, Aug. 16 - Sea Containers Ltd. will issue a restructuring proposal to key creditors in the next few weeks, according to a filing with the Securities and Exchange Commission.

According to the filing, the company has determined that its conglomerate is overly complex, costly and cash negative and its capital structure is unsustainable. Sea Containers said a formal restructuring is necessary to optimize the company's value.

The company said it has prepared a business plan and has determined that its current capital structure is unsustainable

Sea Containers said existing free cash, together with additional liquidity raised from asset sales and a refinancing of container debt, should provide sufficient liquidity to complete the restructuring, and the company believes there is significant value in its remaining assets, including its 50% shareholding of GESeaCo and its owned container business.

In addition, Sea Containers said it expects any restructuring will enable existing shareholders to provide further capital to the company.

Sea Containers said its restructuring priorities include orderly sale of businesses, including its ferry businesses; container manufacturing and depot operations; and property, publishing and plantations; as well as improving the value of its Great North Eastern Railway through enhanced profitability, working with GE Capital to improve GESeaCo profitability and value, reducing central costs, implementing a capital restructuring that respects the relative priority of claims of creditors and shareholders and maximizing equity value.

As previously reported, Sea Containers will not pay the principal on its $115 million of 10¾% senior notes due on Oct. 15 unless it will be able to pay its other notes maturing in 2008, 2009 and 2012 and all other unsecured creditors in full when due.

Also, the company said it would not make the principal payment unless it can retain sufficient working capital.

Sea Containers said it is in default under many of its secured credit facilities because of breaches of financial covenants and other requirements.

The company is also in default under various covenants in its public note indentures, including failure to apply asset sale proceeds to retire public notes.

Sea Containers said it needs to retain its free cash resources to fund operations until the completion of its restructuring.

At July 31, Sea Containers had $610 million of consolidated debt outstanding and $80 million in free cash.

The company said it is also in active discussions with a number of financial institutions to refinance its existing container debt facilities in order to replace liquidity used to repay secured container debt following the company's Silja sale.

Sea Containers is a Hamilton, Bermuda-based provider of passenger and freight transport and marine container leasing.

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