Lonrho and Wicks speak out on Sails demise

SA Independent Liner Services (Sails) ground to a crash-stop last week with a provisional high court liquidation order granted as major investor, Lonhro, walked away and the carrier’s creator, Ian Wicks, was left devastated. Lonrho, active in African investment, cites the current global financial downturn as the primary reason for terminating its relationship with Sails less than a year after acquiring a majority stake of 67% in the South Africanregistered shipping line. Wicks, however, questions the rationale behind the decision. He believes it may have more to do with cash constraints, pointing to Lonrho shares tumbling from 48.5 pence sterling in March, to 9.2 cents at the time of this writing. (October 17). “I do not believe the global credit crunch has anything to do with it. Right now, charter rates are at an all-time low and bunker prices down, so that would bode well for the future of any shipping line. This is the time to start up rather than shut down.” What is more, he believes Lonrho, as a public-listed company, should not have “pulled the plug” without due consideration to creditors, local and international. It is now over to a liquidator to probe the troubled company. Although Lonrho has declined to specify its actual investment in Sails, save to say it was “substantial”, Wicks says the group’s equity investment was US$14 million, the loan facility around US$18 million. Current creditor debt is around US$10 million and shareholder loans around US$30 million. The group’s interim report for half year ending March 31 indicates Sails incurred a loss of £6.1 million on a turnover of £6.7 million, closely linked with the deployment on the weekly Europe-South Africa trade of four chartered, 1 119teu newbuilds. Were liquidation of the threeyear- old company to be rubberstamped, Wicks, with a stake of just under 8% (250 000 shares), stands to lose out to the tune of more than US$18 million, given a valuation of US$7.33 at the last rights issue. FTW questioned Rob Scott, Southern African country manager for Lonrho who was tasked with undertaking an enquiry into Wicks’ business conduct, finally culminating in a 12-charge disciplinary enquiry which is barely off the ground, on the path forward for Lonrho after its soured investment. “The reality of it is a global credit crisis and without available funds it would be imprudent for the directors to continue trading,” he told FTW. “If this business is not going to trade adequately, there is no point – the availability of funds has come to an end.” While unable to determine whether Sails is likely to come on the market, Scott says: “If somebody wants to buy the company they certainly can, whether from us or another party. We have looked around for partners and could not find any.” Meihuizen International, the well-respected Cape Town-based freight forwarder and ship’s agency company, confirms it was approached with an agency offer by Lonrho but declined. As to becoming involved in the North Europe-South Africa/North Europe/South Africa/West Africa trades in the face of heavyweight container shipping presence such as Safmarine and MSC, Scott points to the success of Virgin Atlantic on the “extremely profitable” London- Johannesburg route, once dominated by SAA and BA. “If you make it on this, a notoriously difficult (shipping) route, you can make it anywhere,” he said. And it’s an opinion shared by Wicks who emphasises, however, that launching a new shipping line is a serious business and that Lonrho was aware right from the start it would require US$70 million to get Sails truly up and running. And, yes, he would consider starting afresh, on the proviso a new investor came up with exactly that sum – paid up front.