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Who is SMS ?

MARINE MONEY WEEK June 23-25, 2009 The Art of Asset Recovery “Knowing when to Hold ‘em - Knowing when to Fold ‘em.” Presented by: Leonard J. Hoskinson General Manager, Ship Management Services Inc. Who is SMS ?.

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Who is SMS ?

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  1. MARINE MONEY WEEKJune 23-25, 2009The Art of Asset Recovery“Knowing when to Hold ‘em - Knowing when to Fold ‘em.” Presented by:Leonard J. HoskinsonGeneral Manager, Ship Management Services Inc

  2. Who is SMS ? • A 100% subsidiary of Ultrapetrol– Ravenscroft manages In-House vessels and SMS is the entity through which we manage all Third Party business • Ravenscroft and SMSshare the same staff from our offices which are located in Coral Gables, Florida • We have a 20 year historymanaging ocean and river vessels in wet, dry, combination, offshore, general cargo and passenger ship sectors, for related and third parties • We assist Lenders with asset protection issues

  3. Have this Info Ready • Recent Vessel Inspection • Class Status • Dry dock & Special Survey Status • Repair & Maintenance Status • Operational defects & limitations • Overall Condition • Vessel Payables • Priority Liens • Including Crew Wages • Bunkers • Insurance Premium Overdue • Class Fees • Loan Outstanding vs Current Market Value

  4. Situation Summary • In Default • Covenant and/or Payment • Cross Default with other loans/ships • Co-operation from Client - Yes or No • Charter Details • Vessel Location • Current Voyage- Loaded/In Ballast • Commercial Evaluation e.g. Can current TC continue • Estimated Out of Pocket Expenses to be funded by the Bank including Repatriation Costs • Estimated Time for Arrest process

  5. Re-Structure or Foreclose • Now you have much of the info you need to decide whether or not you are going to work this through with the Client or Foreclose • If Re-Structure - Congratulations and Good Luck! • If, after all things considered it’s Foreclose - each situation has its own plusses and minuses, get your Legal Counsel involved and call SMS

  6. Foreclose - Now What? Hold- Are you prepared to bid-in the vessel at auction Fold or Hold • Fold- Are you prepared to let the vessel go to auction and let it go to the highest bidder at or above the Reserve price

  7. Fold • Loan Loss • Cross Default Implications • Demolition

  8. Hold • Face the Market • Commercial Evaluation is Positive • Proactive towards next stage • Bring in a Partner • Line up a Back to Back transaction

  9. Arrest -Jurisdiction Avoid • Owner’s Backyard • South Africa (if more than one vessel in Fleet) • Any jurisdiction where “Necessaries” rank ahead of the Mortgage • Anywhere you do not have a sound and connected legal presence

  10. Now the Real Work Begins • Appoint Partner’s Manager • Appoint Local Lawyer & Local Agents • Commence Arrest Process • Funding • Crew Pay-off and Repatriation • Mooring & Insurance arrangements

  11. When Changing Crew… • Assume that base wages, overtime, leave wages and final contract will at the initial stage be 20% higher than expected • Current valid crew contracts may be difficult to locate and/or verify • Determine last wage payment details • Remove Owners crew as soon as possible • Make clear that the cash is available in order to calm nerves

  12. Practical Observations • Assume that the costs associated (excluding legal/process fees) with a “good” arrest will be at least $500,000 per vessel:- • Crew pay-off and repatriation 56% • Fuel 15% • Replacement Crew 15% • All Other 7% • Port Risk Insurance 4% • Our Fees 3%

  13. More Practical Observations • Keep the number of Bank “management days” to the very minimum; • Solutions need to be effected as soon as the auction process has been completed; • Otherwise as each day passes, the Bank’s expenses grow;

  14. What the Experts Say • “Managing Default is one of the aspects of ship finance where practical skills are required” (1) • “Until the Global Economy stabilises and resumes its growth path there will continue to be an excess of ships of all types” (2) • “We will have an increasingly modern fleet with a significant part of it toiling away for earnings that fail to match capital costs” (2) • Martin Stopford – Maritime Economics 3rd Edition Chapter 7.9 Dealing with Default • HSBC Shipping Services Limited – Global Shipping Markets Review 2009

  15. Contact Information: Ship Management Services Inc. 3251 Ponce de Leon Blvd Coral Gables, Fl 33134 Tel: +1 305-507-2000 Fax: +1 305-507-2001 All Enquiries: Len Hoskinson ljh@shipmanservices.com Accounting: John Arthur accounting@shipmanservices.com Commercial: Allan Hoite commercial@shipmanservices.com Ship Admin: Gina Hung admin@shipmanservices.com Technical: Deepak Matta technical@shipmanservices.com

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