It’s 71 miles by water from Seattle, up Puget Sound and across the Strait of Juan de Fuca, to Victoria, British Columbia on Vancouver Island.
Victoria was founded in 1843, and became the provincial capital when British Columbia joined the Canadian Confederation in 1871. For most of the nineteenth century, Victoria remained the largest city in British Columbia. Although Vancouver, on the mainland, now holds that distinction, Victoria has retained much of the charm of the 19th and early 20th century, and remains a popular tourist destination.
In June of 1986 a new high-speed aluminum catamaran from Norway was delivered, via the deck of a heavylift ship, to a newly formed Seattle company. That delivery marked the beginning of a company that redefined the interaction between Seattle and Victoria BC, and opened the Victoria tourism market to tens of thousands of visitors each year.
On July 1st, 1986, the 300-passenger Victoria Clipper made her maiden voyage from Seattle to Victoria, BC, offering a fast, comfortable cruise through Puget Sound. The 127-foot vessel was built by Fjellstrand A/S in Omstrand, Norway, for Clipper Navigation, Inc. The boat was powered by waterjets driven by MTU 16V 396 TB 83 diesel engines, each producing 2,010 bhp at 1,940 rpm, propelling the boat to a cruising speed of more than 30 knots.
“We were pretty busy that first year,” says Clipper President and CEO Darrell Bryan. “We ran the boat every day.” Bryan says the company had committed to year-round service. “We kept that commitment,” he says, “even on the days when we had more crew than passengers.”
That commitment paid off. Less than year later, in June of 1987, the company was celebrating its 100,000th passenger.
The company now transports approximately 300,000 passengers a year, with 3 daily round trips during the summer and 1-2 round trips a day during the off-season.
Clipper Navigation was the brainchild of Merideth Tall and Phil Lepley, two entrepreneurs who believed there was a market for a boat to run between Seattle, Victoria and Vancouver, BC competing with the Princess Marguerite, which was a 373-foot, 23-knot passenger/vehicle ferry built in 1949. Although having been “refreshed” in 1975 and again in 1981, Marguerite, operated by the BC Steamship Company, was still almost 40 years old, and the crossing was four and a half hours each way, making a day trip from Seattle less than desirable.
In the ‘80s, Tall was working in the travel industry, and had ridden the high-speed watercraft that plied the waters of Hong Kong. The pair decided on a high-speed aluminum catamaran, feeling the design offered the speed and passenger comfort they were looking for while at the same time offering mechanical simplicity and a robust equipment package that couldn’t be duplicated by other high tech craft.
At the time, BC Steamship was operating the Princess Marguerite, a private Canadian company operated a jetfoil, leased from Boeing, during the summer months of 1985. The Island Jetfoil offered service from Vancouver to Victoria and on to Seattle. The boat only ran for six months before it was deemed too expensive to operate and was returned to Boeing when the business closed.
The pair chose the Norwegian boat design after having eliminated other builders. Norway’s sea conditions mimicked the waters of Puget Sound, and the pair felt that the twin hulls of the new boat with water jet propulsion would be up to the challenge of crossing the Strait of Juan de Fuca on a daily basis. The builder also fortuitously offered to finance the construction of the vessel, unaware that Tall and Lepley’s financing had fallen through just hours before the partners left for Norway to sign the contract. The Norwegian yard had already substantially completed cutting the aluminum for the boat when the partners’ plane landed. Clipper Navigation took delivery of the new vessel in mid June, and started service on July 1st.
Along with a boat, in 1986 Clipper Navigation acquired a general manager. Tall and Lepley preferred to remain in the background, and Darrell Bryan was hired to run the new company. Bryan had already had a successful career in the railroad industry, coming to Clipper with 13 years of experience with the National Railroad Passenger Corporation (Amtrak), holding a variety of high-level management positions in various cities. Bryan had advanced to the position of Senior Director of Station Operations, in Washington DC, where he was responsible for 504 manned and unmanned stations nationwide. He had worked in cities all over the country, but he and his wife wanted to return to the Pacific Northwest. Darrell moved his family to Seattle and accepted the position with Clipper.
“It was a good fit for me,” he says. “I didn’t know much about the marine side of the business, but I knew a lot about passenger reservations, ticketing and operations, and it proved to be a very good move.”
All wasn’t smooth sailing for the young company. The Victoria Clipper had to compete for passengers with BC Steamship and the Princess Marguerite. We didn’t have a very inviting terminal location in Seattle,” Bryan says of the ferry company’s first location. “There had been a failed fast ferry in the same location,” Bryan says, “and a lot of our suppliers had to be convinced that we were not affiliated with the previous tenant before they would deliver to us.”
The company also had problems at the other end of the route. “The first Victoria facility we had was really inadequate,” Bryan says. “It was outside the harbor and buffeted by weather.”
The company succeeded in spite of the challenges, and largely because of the good working relationships the principals had with their employees, clients and especially the officials that held the keys to success. “We developed personal relationships with the government officials we had to work with on a daily basis,” says Bryan. These relationships helped when problems inevitably cropped up, allowing the company to secure a slip in Victoria’s Inner Harbour and establish procedures with US Customs and Border Protection and Duty Free. “We couldn’t do it today,” Bryan says.
Even the US Coast Guard was willing to work with the new company. “The local Coast Guard wasn’t very familiar with the catamaran model,” says Bryan, “And frankly, neither were we.” Bryan notes that aluminum catamaran builders Nichols Bros., of Freeland, Washington, were the local experts. They had been building high-speed aluminum catamarans for several years by the time the Victoria Clipper was delivered.
“Matt Nichols was the expert,” says Bryan. “When there was a question about a Coast Guard regulation, even the Coast Guard referred to Nichols.”
The Seattle terminal was soon improved with a better facility at the Port of Seattle’s Pier 69, and the company succeeded in having its Canadian terminal permanently relocated to Victoria’s Inner Harbour, protected from the winter winds and within walking distance to the city’s grandest buildings.
Shortly after starting the service in 1986, Clipper began including accommodation packages, tours, and other transportation links connecting Seattle and Victoria, Vancouver and Whistler BC. In 1988 the company acquired a second high speed catamaran, Victoria Clipper II, this one built by Nichols Bros. in Washington State and therefore a Jones-Act boat, capable of operating between US destinations, to provide seasonal service and whale watching tours to the San Juan Islands direct from downtown Seattle.
In 1990 the company added the Victoria Clipper III, also a Jones-Act boat, built by Gladding-Hearn in Somerset, Massachusetts.
In 1993, another Norwegian boat was delivered to the rapidly growing company. The newest vessel, Victoria Clipper IV, is the flagship of the fleet. Clipper IV, although built by the same yard as the first boat, benefitted from 7 years of design and technological improvements. Seven feet longer and capable of carrying 30 more paying customers, the Clipper IV was delivered with diesel engines, but in 1996 the boat was fitted with a pair of Allied Signal gas turbines, doubling the vessel’s horsepower to 10,000 which was supposed to cut 45 minutes off the 2.5-hour trip between Seattle and Victoria.
Clipper revived the Princess Marguerite name in 1997, acquiring a 650-passenger, 192-vehicle ferry from BC Ferries for $120,000 per year in a lease-purchase agreement. The vessel operated between Seattle and Victoria until 1999, when Clipper Navigation closed down the operation and returned the Princess Marguerite III to BC Ferries.
The turbine-powered Clipper IV operated for ten years with the new engines, but in 2006 the company had them replaced with a pair of conventional MTU 16v 396 74L diesel powerplants. “We couldn’t justify the amount of fuel we were burning with the turbines,” Bryan says, noting that rising fuel prices meant raising ticket prices or reducing consumption. “Overall it has been a pretty smooth transition,” he says. “It didn’t hurt the schedule, and the passengers haven’t minded.” Travel time is about 2 hours and 45 minutes between the downtowns of Seattle and Victoria.
The vessels continue to operate every day, except for two weeks in January, when the company stops its vessel operations to drydock its vessels and perform improvements, updates and a deep cleaning of the terminals. The company has a longstanding contract with Seattle’s Pacific Fishermen Shipyard to perform hull cleaning, painting, scheduled engine overhauls, replacement and other general maintenance.
Along the way, Merideth Tall bought out her partner, and Darrell Bryan purchased 25 percent of the company from Ms. Tall, who now owns 65 percent. The remaining 10 percent is split between two minority partners. The company, renamed and rebranded Clipper Vacations in 2009, is a major wholesaler of hotels and tours in the Pacific Northwest offering everything from pre and post Alaska Cruise packages to escorted single day wine tasting tours.
While the vessels still play an important role in the company, Clipper Vacations is busy developing its hotel and tour business, growing to become one of the largest providers of hotel packages in the Pacific Northwest, and Amtrak’s biggest customer in terms of bookings. The company keeps 130 full time employees busy, with that number increasing to 170 during the peak summer season. Many of the company’s “summer help” employees come from local commercial maritime families, and seek out Clipper to be on the water and work for a good company while earning money for college. Both of Darrell Bryan’s sons worked for him. “My boys started working here when they were 14,” he says. You can’t do that anymore.
Many of his “summer staff” have stayed on and taken full time, year round positions, and there are a number of employees who have been with the company for more than 20 years.
“It’s a good place to work,” he says.
Bryan says business is good. “Year-to-date, we’re up significantly,” he says, noting that 2001 was shaping up to be the company’s best year before the attacks of 9/11. “We still have a ways to go before we get back to pre-9/11 levels.”
With the variety vacation packages, lodging and transportation offered by the company, along with the natural beauty of the Pacific Northwest that continues to draw visitors from all over the world, those pre-9/11 levels aren’t far off.
Tuesday, August 30, 2011
Long Beach Port Moves Forward With Plan to Purchase LB World Trade Center
The Port of Long Beach has taken the first public steps to purchase the World Trade Center high-rise office building in downtown Long Beach.
The port governing board on Monday approved entering into a 60-day due diligence agreement with the current owner of the 13.5-acre property, Legacy Partners.
The due diligence period would allow the port to inspect the building in detail, examine building documentation and audit leasing documents of current tenants.
The due diligence agreement follows an August 1 non-binding Letter of Intent executed by the port with Legacy that calls for the port to purchase the 27-story WTC building for $130 million. The port put up a $2 million deposit that would be refunded if the port backs out of the deal at anytime within the 60-day period.
For nearly a decade, port management slowly moved forward with plans to build a $300 million state-of-the-art environmentally friendly showcase administration campus on port property adjacent to the current administration building.
While the port planned to use no tax revenue or city funds for the new building, Long Beach Mayor Bob Foster last year vetoed funding for the new port building, questioning the wisdom of the semi-autonomous port authority constructing a new headquarters while his City Hall administration has struggled with city budgets racked by deficits and dwindling revenue streams.
Since the mayor's veto of the new port building, port officials have been looking at various locations throughout Long Beach that could be leased or purchased to serve as a replacement for the current six-story headquarters. Reports over the years have indicated that the current port building would not fare well in a major earthquake as it was built to late-1950s building codes and has not received seismic retrofits.
In addition, the port staff has grown by more than 100 positions in the past five years, severely pushing the capacity limits of the existing building and at times requiring temporary offices to be utilized.
The current seven-story port headquarters building, located in the port on a 10-acre parcel at the southern end of the Queensway Bridge, was completed in 1959 at a cost of just over $3 million.
The 27-story WTC, located just blocks north of the port, was opened in 1989. It is one of the premier office towers in the downtown Long Beach skyline and was heavily sponsored by port funds during construction. It was sold to current owner Legacy Partners in 2007 for $149 million.
The five-member port governing board approved the 60-day due diligence agreement by a 4-0 vote, with commission president Susan Wise recusing herself from the vote because she has an office in the WTC.
While the vote was unanimous, the two newest members of the commission, Doug Drummond and Rich Dines, both expressed reservations about the deal.
Dines, who holds a residential realtors license, said that he had a lot of concerns regarding the purchase of the building.
"Is this actually a good deal for the port? Is it a real value?" he asked.
In addition to his concerns about the outright purchase of the WTC, Dines said unequivocally that he would oppose any scenario calling for the short- or long-term lease of the WTC property by the port. Dines said that having the lease option available gives too much leverage to the seller in negotiations.
"I'm not necessarily opposed to the purchase of the building; I'm opposed to the seller having that leverage against us. It's very easy for them to believe that if we back out of this deal we would be forced to lease from them. That is not the case. There are other options," Dines said.
Referencing what he described as high rent rates at the WTC and an occupancy rate that has dropped since the start of the recession to about 70 percent, Dines said that during the due diligence period port staff need to focus a great deal of scrutiny on the tenants in the building and where each stands with their current leases.
He also said that while the WTC appears "on the outside" to be a very well maintained building, the port needs to do a very detailed inspection of the property during the due diligence period.
"There is one reason, and one reason only, that I would consider going into this agreement and it is the 430 people that work here [in the current port building] every day," Dines said.
"This building is outdated, it has seen better days, and we have outgrown it. We need to move."
However, he added that he is unconvinced that the WTC deal is the best deal available for the port.
Commissioner Drummond, who like Dines joined the port board three weeks ago and has not been involved in the majority of the negotiations regarding the WTC deal, said that he also had reservations about the deal and would not support a lease option of any kind.
Commissioner Thomas Fields pointed out that there are only four Class-A office buildings in downtown Long Beach and only the WTC had the available space to accommodate the entire port staff. He also said that purchasing the building at this time, while property values are deflated, would be a bargain for the port.
Commissioner Nick Sramek said he was excited about the potential purchase. He pointed out that the port has been trying to find a new home since the early 2000s and that the port spent the last year looking at "every property in the city...whether it was for lease or for purchase: anything that was large enough to move our employees into."
Sramek said that many properties were considered, even some far afield and inland from the port, but in the end both Mayor Foster and the port board wanted the port headquarters to be located in downtown. Sramek also pointed out that in addition to the current port building being outdated, "it is seismically-challenged. We need to find a home for the employees that is safe and where everyone can be in the same facility."
He said that after looking as so many options throughout the city, "the WTC was by far the most cost-effective."
Port staff estimate that the total cost to move their headquarters, including the purchase of the WTC property, would be $162 million.
The port governing board on Monday approved entering into a 60-day due diligence agreement with the current owner of the 13.5-acre property, Legacy Partners.
The due diligence period would allow the port to inspect the building in detail, examine building documentation and audit leasing documents of current tenants.
The due diligence agreement follows an August 1 non-binding Letter of Intent executed by the port with Legacy that calls for the port to purchase the 27-story WTC building for $130 million. The port put up a $2 million deposit that would be refunded if the port backs out of the deal at anytime within the 60-day period.
For nearly a decade, port management slowly moved forward with plans to build a $300 million state-of-the-art environmentally friendly showcase administration campus on port property adjacent to the current administration building.
While the port planned to use no tax revenue or city funds for the new building, Long Beach Mayor Bob Foster last year vetoed funding for the new port building, questioning the wisdom of the semi-autonomous port authority constructing a new headquarters while his City Hall administration has struggled with city budgets racked by deficits and dwindling revenue streams.
Since the mayor's veto of the new port building, port officials have been looking at various locations throughout Long Beach that could be leased or purchased to serve as a replacement for the current six-story headquarters. Reports over the years have indicated that the current port building would not fare well in a major earthquake as it was built to late-1950s building codes and has not received seismic retrofits.
In addition, the port staff has grown by more than 100 positions in the past five years, severely pushing the capacity limits of the existing building and at times requiring temporary offices to be utilized.
The current seven-story port headquarters building, located in the port on a 10-acre parcel at the southern end of the Queensway Bridge, was completed in 1959 at a cost of just over $3 million.
The 27-story WTC, located just blocks north of the port, was opened in 1989. It is one of the premier office towers in the downtown Long Beach skyline and was heavily sponsored by port funds during construction. It was sold to current owner Legacy Partners in 2007 for $149 million.
The five-member port governing board approved the 60-day due diligence agreement by a 4-0 vote, with commission president Susan Wise recusing herself from the vote because she has an office in the WTC.
While the vote was unanimous, the two newest members of the commission, Doug Drummond and Rich Dines, both expressed reservations about the deal.
Dines, who holds a residential realtors license, said that he had a lot of concerns regarding the purchase of the building.
"Is this actually a good deal for the port? Is it a real value?" he asked.
In addition to his concerns about the outright purchase of the WTC, Dines said unequivocally that he would oppose any scenario calling for the short- or long-term lease of the WTC property by the port. Dines said that having the lease option available gives too much leverage to the seller in negotiations.
"I'm not necessarily opposed to the purchase of the building; I'm opposed to the seller having that leverage against us. It's very easy for them to believe that if we back out of this deal we would be forced to lease from them. That is not the case. There are other options," Dines said.
Referencing what he described as high rent rates at the WTC and an occupancy rate that has dropped since the start of the recession to about 70 percent, Dines said that during the due diligence period port staff need to focus a great deal of scrutiny on the tenants in the building and where each stands with their current leases.
He also said that while the WTC appears "on the outside" to be a very well maintained building, the port needs to do a very detailed inspection of the property during the due diligence period.
"There is one reason, and one reason only, that I would consider going into this agreement and it is the 430 people that work here [in the current port building] every day," Dines said.
"This building is outdated, it has seen better days, and we have outgrown it. We need to move."
However, he added that he is unconvinced that the WTC deal is the best deal available for the port.
Commissioner Drummond, who like Dines joined the port board three weeks ago and has not been involved in the majority of the negotiations regarding the WTC deal, said that he also had reservations about the deal and would not support a lease option of any kind.
Commissioner Thomas Fields pointed out that there are only four Class-A office buildings in downtown Long Beach and only the WTC had the available space to accommodate the entire port staff. He also said that purchasing the building at this time, while property values are deflated, would be a bargain for the port.
Commissioner Nick Sramek said he was excited about the potential purchase. He pointed out that the port has been trying to find a new home since the early 2000s and that the port spent the last year looking at "every property in the city...whether it was for lease or for purchase: anything that was large enough to move our employees into."
Sramek said that many properties were considered, even some far afield and inland from the port, but in the end both Mayor Foster and the port board wanted the port headquarters to be located in downtown. Sramek also pointed out that in addition to the current port building being outdated, "it is seismically-challenged. We need to find a home for the employees that is safe and where everyone can be in the same facility."
He said that after looking as so many options throughout the city, "the WTC was by far the most cost-effective."
Port staff estimate that the total cost to move their headquarters, including the purchase of the WTC property, would be $162 million.
Latest Crowley ATB Ready for West Coast Service
Jacksonville, Fla.-based Crowley Maritime Corporation announced Monday the firm's Vision/650-10, the last of 10 Articulated Tug Barges (ATBs) in the 650-series new-build program, has been delivered by V.T. Halter Marine in Pascougla, Miss.
The Vision/650-10 is now ready to enter service, Crowley said, and will transport petroleum products between US West Coast ports. The ATB, which has a capacity of 185,000 barrels, will be operated by Crowley's petroleum services group.
According to Crowley, the Vision/650-10 incorporates many unique features, including a fixed-tank cleaning system, complete cargo heating system and the ability to carry EZ chemicals.
The 650-class barges are 27,000 deadweight tons, 587 feet in length, 74 feet wide and 40 feet in depth. When coupled for operation the tug and tank vessel measure 689 feet. The fully loaded draft is 30 feet.
The vessels can make 12 knots, powered by Twin Screw Wartsila electronically controlled engines, which generate more than 10,500 horsepower.
In making the announcement, Crowley highlighted additional features of the 650 class including the latest systems technology and double-hull construction for safety and reliability.
"Barge 650-10, like its sister vessels (650-1 through 650-9), is also certified by ABS to comply with the International Maritime IMO Green Passport program. All of Crowley's ATBs are built under the ABS SafeHull program for environmental protection. This program puts the vessel design through an exhaustive review to identify structural loads and strengthen the vessel structure," the Crowley announcement said.
Crowley already has nine 650 class ATBs capable of carrying 185,000 bbls and four 550 class ATBs capable of carrying 155,000 bbls. These vessels are Jones Act-qualified, all having been built in the United States, owned by US Citizens and crewed by US merchantmen. The firm also has three larger, Jones Act-qualified ATBs, known as the 750 class – each with 330,000 barrels of capacity – are under construction, with the first scheduled for delivery in the fourth quarter of 2011.
The Vision/650-10 is now ready to enter service, Crowley said, and will transport petroleum products between US West Coast ports. The ATB, which has a capacity of 185,000 barrels, will be operated by Crowley's petroleum services group.
According to Crowley, the Vision/650-10 incorporates many unique features, including a fixed-tank cleaning system, complete cargo heating system and the ability to carry EZ chemicals.
The 650-class barges are 27,000 deadweight tons, 587 feet in length, 74 feet wide and 40 feet in depth. When coupled for operation the tug and tank vessel measure 689 feet. The fully loaded draft is 30 feet.
The vessels can make 12 knots, powered by Twin Screw Wartsila electronically controlled engines, which generate more than 10,500 horsepower.
In making the announcement, Crowley highlighted additional features of the 650 class including the latest systems technology and double-hull construction for safety and reliability.
"Barge 650-10, like its sister vessels (650-1 through 650-9), is also certified by ABS to comply with the International Maritime IMO Green Passport program. All of Crowley's ATBs are built under the ABS SafeHull program for environmental protection. This program puts the vessel design through an exhaustive review to identify structural loads and strengthen the vessel structure," the Crowley announcement said.
Crowley already has nine 650 class ATBs capable of carrying 185,000 bbls and four 550 class ATBs capable of carrying 155,000 bbls. These vessels are Jones Act-qualified, all having been built in the United States, owned by US Citizens and crewed by US merchantmen. The firm also has three larger, Jones Act-qualified ATBs, known as the 750 class – each with 330,000 barrels of capacity – are under construction, with the first scheduled for delivery in the fourth quarter of 2011.
Horizon Lines Refinancing Planned for September Completion
Jones Act carrier Horizon Lines announced Monday that it has entered into a definitive agreement and secured commitments from holders of more than 99 percent of its 4.25 percent convertible senior notes due in 2012 that will allow the carrier to complete a $655 million refinancing of the firm's entire capital structure.
Horizon, which operates the largest domestic US ocean fleet, said "the modified agreement will completely recapitalize the company and eliminate the refinancing risk related to the maturity of the existing convertible notes and the existing bank debt in 2012. It also provides liquidity to fund continued operations through a new asset-based revolving loan (ABL) facility."
The note holders have also committed to provide Horizon with access to a $25 million bridge loan to serve as a liquidity cushion through the completion of the recapitalization.
Bondholders are being asked to swap the $330 million in existing 4.25 percent 2012 notes for $280 million in 6 percent convertible notes maturing five-and-a-half years from issuance, and $50 million in stock.
Horizon, which has been reeling from a government-sanctioned $15 million fine after pleading guilty to price-fixing in the Puerto Rico trade last March, missed a mid-August payment on its current notes and is operating within a 30-day grace period. Lenders had already altered covenants of the current credit facility twice this year and have declined further waivers or amendments.
The carrier said that assuming full participation in the exchange offer, holders of the 2012 convertible notes will own approximately 95 percent of the firm's stock on an as-converted basis following the exchange offer.
Horizon indicated that if participation of the bondholders in not realized, the firm would likely be compelled to "seek bankruptcy protection."
Additional components of the larger refinancing plan include: a commitment from 2012 note holders to purchase $225.0 million of new five-year 11 percent first-lien secured notes to be issued by a Horizon subsidiary, and a commitment by 2012 note holders to purchase $100 million of new five-year maturity second-lien 13 percent to 15 percent secured notes to be issued by a subsidiary. The $100 million amount includes the $25 million bridge loan.
Proceeds from the secured notes will be used, among other things, to satisfy in full Horizon's obligations outstanding under its existing first-lien revolving credit facility and term loan, which currently total $269.7 million.
The carrier expects to complete the exchange offer of the existing 2012 convertible notes by the end of September, at which time it expects to close the entire refinancing.
Horizon, which operates the largest domestic US ocean fleet, said "the modified agreement will completely recapitalize the company and eliminate the refinancing risk related to the maturity of the existing convertible notes and the existing bank debt in 2012. It also provides liquidity to fund continued operations through a new asset-based revolving loan (ABL) facility."
The note holders have also committed to provide Horizon with access to a $25 million bridge loan to serve as a liquidity cushion through the completion of the recapitalization.
Bondholders are being asked to swap the $330 million in existing 4.25 percent 2012 notes for $280 million in 6 percent convertible notes maturing five-and-a-half years from issuance, and $50 million in stock.
Horizon, which has been reeling from a government-sanctioned $15 million fine after pleading guilty to price-fixing in the Puerto Rico trade last March, missed a mid-August payment on its current notes and is operating within a 30-day grace period. Lenders had already altered covenants of the current credit facility twice this year and have declined further waivers or amendments.
The carrier said that assuming full participation in the exchange offer, holders of the 2012 convertible notes will own approximately 95 percent of the firm's stock on an as-converted basis following the exchange offer.
Horizon indicated that if participation of the bondholders in not realized, the firm would likely be compelled to "seek bankruptcy protection."
Additional components of the larger refinancing plan include: a commitment from 2012 note holders to purchase $225.0 million of new five-year 11 percent first-lien secured notes to be issued by a Horizon subsidiary, and a commitment by 2012 note holders to purchase $100 million of new five-year maturity second-lien 13 percent to 15 percent secured notes to be issued by a subsidiary. The $100 million amount includes the $25 million bridge loan.
Proceeds from the secured notes will be used, among other things, to satisfy in full Horizon's obligations outstanding under its existing first-lien revolving credit facility and term loan, which currently total $269.7 million.
The carrier expects to complete the exchange offer of the existing 2012 convertible notes by the end of September, at which time it expects to close the entire refinancing.
Riverside Drops 2 1/2-Year Legal Battle Over SoCal Ports Expansion
After three courtroom defeats in just over two years and nearly $350,000 in legal expenses, the California desert city of Riverside has decided to drop lawsuits over the impacts on the city of expansion at the Southern California ports of Long Beach and Los Angeles.
Riverside officials filed suit against the cities and ports of Long Beach and Los Angeles in 2009, alleging that the approval of expansion projects at the two ports did not adequately determine the environmental and congestion impacts on Riverside.
Located inland about 60 miles northeast of the ports, the Riverside area is home to many warehouses that receive goods moving through the ports. In addition, the major rail lines heading from the ports east out of Southern California travel through the Riverside area, which Riverside officials said seriously impacts traffic and air quality in the inland area.
In the suits, Riverside demanded that the ports redo environmental documents key to ongoing terminal expansion projects at the two ports. In addition, the city sought payments from the ports to build grade separations isolating cargo rail traffic from the city's street traffic.
In March 2010, Orange County Superior Court Judge Ronald L. Bauer ruled that the port environmental documents properly considered the possible impacts to Riverside and, in turn, properly concluded that terminal expansion would have "an insignificant impact" on the city. An earlier lower court ruling on the Long Beach case had reached the same conclusion in favor of the port.
Riverside appealed after losing in the two lower courts, but the appeals court in the Los Angeles port case also rejected the city's arguments and ruled in favor of the port. An appeal on the Long Beach port case was still pending.
Concerns had been raised by the shipping industry that a Riverside victory could set a precedent where ports could be held financially liable for increased cargo traffic impacts to dozens of communities regardless of distance from the actual ports.
Riverside officials told the Press-Enterprise newspaper that the more than two-year legal battle cost the city between $350,000 and $450,000 in legal expenses.
Riverside officials filed suit against the cities and ports of Long Beach and Los Angeles in 2009, alleging that the approval of expansion projects at the two ports did not adequately determine the environmental and congestion impacts on Riverside.
Located inland about 60 miles northeast of the ports, the Riverside area is home to many warehouses that receive goods moving through the ports. In addition, the major rail lines heading from the ports east out of Southern California travel through the Riverside area, which Riverside officials said seriously impacts traffic and air quality in the inland area.
In the suits, Riverside demanded that the ports redo environmental documents key to ongoing terminal expansion projects at the two ports. In addition, the city sought payments from the ports to build grade separations isolating cargo rail traffic from the city's street traffic.
In March 2010, Orange County Superior Court Judge Ronald L. Bauer ruled that the port environmental documents properly considered the possible impacts to Riverside and, in turn, properly concluded that terminal expansion would have "an insignificant impact" on the city. An earlier lower court ruling on the Long Beach case had reached the same conclusion in favor of the port.
Riverside appealed after losing in the two lower courts, but the appeals court in the Los Angeles port case also rejected the city's arguments and ruled in favor of the port. An appeal on the Long Beach port case was still pending.
Concerns had been raised by the shipping industry that a Riverside victory could set a precedent where ports could be held financially liable for increased cargo traffic impacts to dozens of communities regardless of distance from the actual ports.
Riverside officials told the Press-Enterprise newspaper that the more than two-year legal battle cost the city between $350,000 and $450,000 in legal expenses.
Friday, August 26, 2011
OPINION: The Enemy of Good
By John Berge, Vice President Pacific Merchant Shipping Association
It has been 15 years since the publication of the National Research Council’s Stemming the Tide – Controlling Introductions of Nonindigenous Species by Ship’s Ballast Water. It pulled the lid off the uncomfortable reality that ballast water, which is so essential to keeping ships upright and in one piece, could also be the source of bio-invaders causing havoc in port ecosystems around the planet.
A lot has changed in those 15 years, beginning with the adoption of ballast water management for virtually all vessels, and now the next leap forward with installation of ballast water treatment systems. This technology has made enormous strides in just the last few years, achieving organism reductions on the order of 10,000 times the source ballast water. While we now have a good idea of the capabilities of ballast water treatment, just as importantly we better understand the limitations of this technology, and our ability to measure success.
Unfortunately, public policy adopted in California has failed to keep pace with science, and we are now seeing the classic situation of the pursuit of perfection becoming the enemy of the good.
California legislatively adopted discharge standards in 2007. Those standards are essentially 1,000 times more stringent than the International Maritime Organization D-2 and the pending US Coast Guard Phase 1 standard. We have watched patiently as time has passed, hoping that treatment technology could advance to the point of meeting California’s aspirational standard before 2012, when the vast majority of new-builds will be require to meet that standard.
Although there has been mounting evidence over the last couple of years as to the limitations of both treatment and testing methodologies, it was the publication of the US EPA Science Advisory Board’s (SAB) report in July that put the question of treatment system capabilities to rest. The SAB report was unequivocal in its findings: while 5 types of ballast water management systems (BWMS) demonstrated the ability to meet the IMO D-2 standard, “no current BWMS types can meet a 100x or 1,000x discharge standard”.
One would think that the findings of the nation’s ballast water experts would settle this issue, but the staff of the California State Lands Commission (Commission) continues to cling to the existing state standard. Rather than recommend changing it to reflect reality, they are instead recommending that the state maintain its unfeasible and immeasurable standard – and as a way out, develop a compliance verification protocol for their standard that ensures full compliance by industry.
In other words, they are going to fake it – which they essentially acknowledge. All of this effort comes at a time of a much-publicized effort by California state legislators to review unnecessary and redundant regulations.
We appreciate the Commission staff’s desire to keep ship owners on the right side of the law, but who benefits from an unattainable standard that can be complied with only through false compliance verification? Certainly not the people of California, who deserve to know the real implications of ballast water discharges into state waters as opposed to a misleading and false sense of security from a faked standard. Nor does the ship owner, who is ultimately liable under the federal Clean Water Act, for meeting a discharge standard that the world’s scientists have concluded cannot be met by any system available for installation.
The State Lands Commissioners have the opportunity on September 1 to recognize the realities for treating ballast water discharges, and recommend the adoption of the IMO standards that truly represent the best mitigation that today’s technology can achieve. To do otherwise will be to ignore accepted science and put California on the wrong side of this debate.
It has been 15 years since the publication of the National Research Council’s Stemming the Tide – Controlling Introductions of Nonindigenous Species by Ship’s Ballast Water. It pulled the lid off the uncomfortable reality that ballast water, which is so essential to keeping ships upright and in one piece, could also be the source of bio-invaders causing havoc in port ecosystems around the planet.
A lot has changed in those 15 years, beginning with the adoption of ballast water management for virtually all vessels, and now the next leap forward with installation of ballast water treatment systems. This technology has made enormous strides in just the last few years, achieving organism reductions on the order of 10,000 times the source ballast water. While we now have a good idea of the capabilities of ballast water treatment, just as importantly we better understand the limitations of this technology, and our ability to measure success.
Unfortunately, public policy adopted in California has failed to keep pace with science, and we are now seeing the classic situation of the pursuit of perfection becoming the enemy of the good.
California legislatively adopted discharge standards in 2007. Those standards are essentially 1,000 times more stringent than the International Maritime Organization D-2 and the pending US Coast Guard Phase 1 standard. We have watched patiently as time has passed, hoping that treatment technology could advance to the point of meeting California’s aspirational standard before 2012, when the vast majority of new-builds will be require to meet that standard.
Although there has been mounting evidence over the last couple of years as to the limitations of both treatment and testing methodologies, it was the publication of the US EPA Science Advisory Board’s (SAB) report in July that put the question of treatment system capabilities to rest. The SAB report was unequivocal in its findings: while 5 types of ballast water management systems (BWMS) demonstrated the ability to meet the IMO D-2 standard, “no current BWMS types can meet a 100x or 1,000x discharge standard”.
One would think that the findings of the nation’s ballast water experts would settle this issue, but the staff of the California State Lands Commission (Commission) continues to cling to the existing state standard. Rather than recommend changing it to reflect reality, they are instead recommending that the state maintain its unfeasible and immeasurable standard – and as a way out, develop a compliance verification protocol for their standard that ensures full compliance by industry.
In other words, they are going to fake it – which they essentially acknowledge. All of this effort comes at a time of a much-publicized effort by California state legislators to review unnecessary and redundant regulations.
We appreciate the Commission staff’s desire to keep ship owners on the right side of the law, but who benefits from an unattainable standard that can be complied with only through false compliance verification? Certainly not the people of California, who deserve to know the real implications of ballast water discharges into state waters as opposed to a misleading and false sense of security from a faked standard. Nor does the ship owner, who is ultimately liable under the federal Clean Water Act, for meeting a discharge standard that the world’s scientists have concluded cannot be met by any system available for installation.
The State Lands Commissioners have the opportunity on September 1 to recognize the realities for treating ballast water discharges, and recommend the adoption of the IMO standards that truly represent the best mitigation that today’s technology can achieve. To do otherwise will be to ignore accepted science and put California on the wrong side of this debate.
Long Beach Port Approves $16.9M Transfer of Port Funds to City Hall
The five-member governing board for the Port of Long Beach on Monday approved a City Hall request for the transfer of nearly $17 million in port funds to the city and agreed to draw down the port's ample cash reserves to pay for the majority of the amount.
The annual transfer, which is permitted under the city charter, is based on 5 percent of the port's previous fiscal year operating revenue.
The $16.9 million transfer for FY2012 was formally requested by City Hall on July 5. The transfer has been opposed by six port industry trade associations.
The port board approved transferring the funds in a 4-1 vote, but added the caveat that it be made in four equal quarterly payments over the city's 2012 fiscal year, which starts Oct. 1. Last year, the board approved making the FY2011 transfer in a single lump sum at the request of City Hall.
Originally conceived as an emergency financial boost for the revenue-strapped city more than 15 years ago, the annual port-to-city transfer has been requested by City Hall and approved by the port ever year since. Monday's vote was the first time since the port began making the annual transfers that a port commissioner voted "nay" to a transfer.
The transfer funds, under state law, must go into the city's Tidelands Operating Funds and can only be used within the tidelands (coastal) areas of the city for very specific maritime, maritime-related recreation, and environmental uses. The funds cannot be mixed with the city's general fund or used for general fund purposes.
City Hall claims that the tidelands accounts, which are managed by city officials, are in danger of going broke and that a backlog of more than $300 million in capital improvement projects in the tidelands areas currently exists.
Immediately prior to the board's discussion Monday on the transfer, a related item was also considered.
The port board was informed by the Alameda Corridor Transportation Authority, which operates the 20-mile-long Alameda Corridor cargo rail line servicing the port, that the authority required $2.95 million from the port in FY2012 to cover a debt service shortfall on the $2.4 billion corridor, which opened in 2002. ACTA had expected to ask for another $5 million from the port, but reported that it would not need funds beyond the $2.95 million.
After approving the ACTA funds, the port board turned to the city transfer and how to pay for it. Port board freshman Doug Drummond made a motion that the $16.9 million transfer to the city be made as requested and that the port's FY2012 budget be increased by $11.9 million – the amount of the transfer minus the $5 million ACTA no longer needed from the port but which the port had already budgeted.
Drummond failed to receive a second on his motion, but Commissioner Rich Dines, who along with Drummond joined the board two weeks ago, moved that the transfer to the city be approved with no budget details, to which Drummond offered a second.
Commission President Susan Wise moved for an amendment to Dines motion, calling for the transfer to the city to be made in four equal quarterly installments over FY2012.
"We're moving into a time of uncertainty," Wise said, referencing the weakening national economy and slowing trade numbers. "I want the port to have some flexibility."
Commissioner Thomas Fields agreed.
"I think it only prudent that we follow Commissioner Wise's amendment because we are moving into some perilous times."
Commissioner Nick Sramek pointed out that two weeks ago the port board asked City Hall to provide a prioritized list of tidelands-area projects on which City Hall planned to spend the transfer funds.
Sramek indicated that the request prompted a recent memo to the port board from City Hall, one which – while Sramek did not detail the exact contents – clearly did not include the information the port board had sought.
"The city is asking us for $17 million, I just thought it would be common courtesy to provide us with the information. They said they have it. That they could provide it. And they just choose not to provide it," Sramek said.
Sramek added that he could not support the transfer and ultimately voted no. He pointed out that the port plans to borrow $300 million for capital projects this year, an amount that will rise to $1.5 billion over the next five years.
"It's been different in the past. We haven't had to borrow money like this. We really need to be careful...especially looking at the economic numbers, trade going down and competition going up," Sramek said. "We really need to be careful with what we do with our dollars and make sure they are really channeled in the right areas."
Sramek referenced the city charter language regarding the transfer, pointing out that the port board could reject the transfer request if the funds are needed for capital projects in the port.
"If we are borrowing $300 million this year, that says we need money for capital projects," Sramek said.
Drummond, who initially refused to support Wise's amendment to make quarterly payments, said that the port should make the transfer in one lump sum, as originally requested by City Hall. He argued that if economic conditions worsened and the port needed to make up the $16.9 million of the transfer, the port should just slow down development and spend less on the nearly $630 million budgeted in FY2012 for capital projects.
As comparison, the $17 million for the transfer is equal to the port's entire FY2012 budget amount allocated for installing ship-to-shore electric power at the port's largest container terminal; just over the amount the port plans to spend on all port security projects in FY2012; and, just over what the port plans to spend on a major rail track realignment project.
Drummond added that contemplating changes to the transfer is a "mistake" that will only create "continued bad will with the city."
Members representing two of the opposed industry groups, the Propeller Club and the Pacific Merchant Shipping Association, reasserted their positions to the board, saying that keeping the $16.9 million in the port – where it can create jobs and increase the port's competitiveness – is a more prudent decision.
The final vote by the board approved the transfer in four equal quarterly payments, which port staff said city officials had already indicated would not be a problem. The port board also agreed to draw down the port's substantial cash reserves by $11.9 million to pay for the majority of the transfer, with the rest being made up by the $5 million already budgeted to cover now un-required payment to ACTA. The draw down will still leave the port with more than 600 days of operating funds in the port's cash reserves.
The port FY2012 budget faces approval by the City Council – and a possible wielding of the mayor's budget line item veto power – early next month.
The annual transfer, which is permitted under the city charter, is based on 5 percent of the port's previous fiscal year operating revenue.
The $16.9 million transfer for FY2012 was formally requested by City Hall on July 5. The transfer has been opposed by six port industry trade associations.
The port board approved transferring the funds in a 4-1 vote, but added the caveat that it be made in four equal quarterly payments over the city's 2012 fiscal year, which starts Oct. 1. Last year, the board approved making the FY2011 transfer in a single lump sum at the request of City Hall.
Originally conceived as an emergency financial boost for the revenue-strapped city more than 15 years ago, the annual port-to-city transfer has been requested by City Hall and approved by the port ever year since. Monday's vote was the first time since the port began making the annual transfers that a port commissioner voted "nay" to a transfer.
The transfer funds, under state law, must go into the city's Tidelands Operating Funds and can only be used within the tidelands (coastal) areas of the city for very specific maritime, maritime-related recreation, and environmental uses. The funds cannot be mixed with the city's general fund or used for general fund purposes.
City Hall claims that the tidelands accounts, which are managed by city officials, are in danger of going broke and that a backlog of more than $300 million in capital improvement projects in the tidelands areas currently exists.
Immediately prior to the board's discussion Monday on the transfer, a related item was also considered.
The port board was informed by the Alameda Corridor Transportation Authority, which operates the 20-mile-long Alameda Corridor cargo rail line servicing the port, that the authority required $2.95 million from the port in FY2012 to cover a debt service shortfall on the $2.4 billion corridor, which opened in 2002. ACTA had expected to ask for another $5 million from the port, but reported that it would not need funds beyond the $2.95 million.
After approving the ACTA funds, the port board turned to the city transfer and how to pay for it. Port board freshman Doug Drummond made a motion that the $16.9 million transfer to the city be made as requested and that the port's FY2012 budget be increased by $11.9 million – the amount of the transfer minus the $5 million ACTA no longer needed from the port but which the port had already budgeted.
Drummond failed to receive a second on his motion, but Commissioner Rich Dines, who along with Drummond joined the board two weeks ago, moved that the transfer to the city be approved with no budget details, to which Drummond offered a second.
Commission President Susan Wise moved for an amendment to Dines motion, calling for the transfer to the city to be made in four equal quarterly installments over FY2012.
"We're moving into a time of uncertainty," Wise said, referencing the weakening national economy and slowing trade numbers. "I want the port to have some flexibility."
Commissioner Thomas Fields agreed.
"I think it only prudent that we follow Commissioner Wise's amendment because we are moving into some perilous times."
Commissioner Nick Sramek pointed out that two weeks ago the port board asked City Hall to provide a prioritized list of tidelands-area projects on which City Hall planned to spend the transfer funds.
Sramek indicated that the request prompted a recent memo to the port board from City Hall, one which – while Sramek did not detail the exact contents – clearly did not include the information the port board had sought.
"The city is asking us for $17 million, I just thought it would be common courtesy to provide us with the information. They said they have it. That they could provide it. And they just choose not to provide it," Sramek said.
Sramek added that he could not support the transfer and ultimately voted no. He pointed out that the port plans to borrow $300 million for capital projects this year, an amount that will rise to $1.5 billion over the next five years.
"It's been different in the past. We haven't had to borrow money like this. We really need to be careful...especially looking at the economic numbers, trade going down and competition going up," Sramek said. "We really need to be careful with what we do with our dollars and make sure they are really channeled in the right areas."
Sramek referenced the city charter language regarding the transfer, pointing out that the port board could reject the transfer request if the funds are needed for capital projects in the port.
"If we are borrowing $300 million this year, that says we need money for capital projects," Sramek said.
Drummond, who initially refused to support Wise's amendment to make quarterly payments, said that the port should make the transfer in one lump sum, as originally requested by City Hall. He argued that if economic conditions worsened and the port needed to make up the $16.9 million of the transfer, the port should just slow down development and spend less on the nearly $630 million budgeted in FY2012 for capital projects.
As comparison, the $17 million for the transfer is equal to the port's entire FY2012 budget amount allocated for installing ship-to-shore electric power at the port's largest container terminal; just over the amount the port plans to spend on all port security projects in FY2012; and, just over what the port plans to spend on a major rail track realignment project.
Drummond added that contemplating changes to the transfer is a "mistake" that will only create "continued bad will with the city."
Members representing two of the opposed industry groups, the Propeller Club and the Pacific Merchant Shipping Association, reasserted their positions to the board, saying that keeping the $16.9 million in the port – where it can create jobs and increase the port's competitiveness – is a more prudent decision.
The final vote by the board approved the transfer in four equal quarterly payments, which port staff said city officials had already indicated would not be a problem. The port board also agreed to draw down the port's substantial cash reserves by $11.9 million to pay for the majority of the transfer, with the rest being made up by the $5 million already budgeted to cover now un-required payment to ACTA. The draw down will still leave the port with more than 600 days of operating funds in the port's cash reserves.
The port FY2012 budget faces approval by the City Council – and a possible wielding of the mayor's budget line item veto power – early next month.
