Restructuring Navigator Gas Transport Plc. Harvard Case Solution & Analysis


This case is about the reconstruction or restructure of the Navigator Gas Transport PLC., which is entering into being in 1997 with the view of building and operating five 22,000 cubic meter (cbm) semi-refrigerated gas carriers. Giovanni Mahler, who is a Swiss national, is considered to be the leading equity holder of Navigator Gas Transport PLC., who also holds a substantial amount of equity in Vela Energy Holding, which wholly owned the equity of Cambridge Gas Transport. Mr. Mahler and his team expected that the liquefied and petrochemical, gas transport industry was about to experience a growth and they wanted to have assets ready to grab benefits from the expected boom in the industry.

The ships of Navigator Gas Transport PLC. were built in such a way that they can handle various types of cargo, with ease and speed. These ships were more competitive, multipurpose and versatile in nature than other ships of competitors. Semi-refrigerated vessels were used to maintain the perishable cargo in its real state for a long time.

Problem Statement

After facing some financial and legal issues over security, the vessels for Navigator Gas Transport PLC. were made in the shipyard, and at that time the financial crisis of Asia affected the business of the petrochemical &gas industry; the investors were concerned about the future of the Navigator Gas Transport PLC., because in the era of the Asian financial crisis, the demand of the LPG and petrochemical gases were reduced dramatically. This also affected the demand of other products as well. At the energy conference in 1999, there were massive rumors about the delivery of the vessels. The investors were concerned about when would the vessel be delivered to the company, because of that reason the notes were stared to trade at significantly lower price than their respective face values.

For this reason, the equity holders or members of the company made a suggestion to the management of the Navigator Gas Transport PLC., to restructure their resources with the hope that the company would benefit in the future as the proposed plan called for the immediate sale of the company’s fleet and then the distribution of the proceeds to the creditors.

As a result of the proposed restructure strategy, the Vela Energy, who was holding around 70% of the equities of the having the right of refusal to buy the ships, so similarly, they also had to right to buy the ships at the price which would be quoted by any other buyer of the ships. This was rejected by the creditors of the company, consequently, the company approached the U.S. Bankruptcy court in order to file a voluntary petition.

Just after a couple of weeks, the commission was formed and authorized to conduct analysis of the current situation and the committee suggested that the both parties, i.e. creditors and the management team of the Navigator Gas Transport PLC., did not agree on the same condition.


Net Present value (NPV)

After analyzing the proposed restructuring plan based on our knowledge and professional judgments, we have decided to start appraising the project on the basis of net present value. We have been provided with the proposed and projected income statement and balance sheet from 2004 to 2008. The evaluation period was estimated to be 5 years.

The revenues from the vessels were estimated to be $525 million in year 2004, then it was increased to $550 million in 2005 and remained at the same level in 2006, then declined to $540 million in 2007 and 2008.

The utilization rate was assumed to be remain stable at the rate of 85% throughout the period. Overall revenues were deducted from the direct costs and we have arrived the figure of gross profit. After deducting technical management fees, commercial management fees and administrative expenses from the gross revenues, which led us to the value of earnings before interest, tax, depreciation and amortization (EBITDA). After subtracting interest and depreciation, the before tax earnings were considered as the earnings of the year, since there were no tax rate assumed.

When the net profit has been identified, we have started computations for the net present value. For this reason, we have calculated the free cash flows from the amount of net..................................

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As the creditors to pursue their claims in multiple jurisdictions bankruptcy? David Butters, managing director of Lehman Brothers, is in talks to restructure Navigator Gas Transport, a shipping company, which is headquartered in Switzerland, are included in the Isle of Man, and operates ships that travel around the world. In the analysis of the election, he faced, students must consider how the initial capitalization Navigator contributed to its financial difficulties, to evaluate several restructuring plans from different points of view and evaluate how Butters can resolve legal conflicts that arise within the jurisdiction of the bankruptcy. In addition, they must determine if Timmy has sufficient information about and control over operations in the Navigator to ensure long-term participation in many trials. "Hide
by C. Fritz Foley Source: Harvard Business School 16 pages. Publication Date: December 18, 2006. Prod. #: 207092-PDF-ENG

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