American Feeder Lines ends cargo feeder service
Wednesday, 30 May Canadian Sailings

 

Posted on:May 30th, 2012

By Tom Peters

After only nine months in operation, American Feeder Lines (AFL) has ended its cargo feeder service from Halifax to Boston and Portland, Maine, citing a lack of long-term investors as the major cause of its demise.

“Our main thing involved getting investors to keep us going,” AFL’s Chief Operating Officer Rudy Mack said in an interview. “The service was financed from the private pockets of four partners, two in Germany and Mr. Pyne (Percy Pyne IV of Pyne Companies Ltd.), and myself in the U.S. But due to the fact that the volume we expected from the carriers and from trade, based on discussions with them, was not realized, the investors needed to dig deeper to cover our cash flow problem. We needed cash flow to run the ship, to buy the fuel, to pay stevedores and all of that,” he said.

Mack said AFL had “very good discussions” with interested investors “almost until to the last moment and then everybody stepped out.”

He felt the investors backed away because of the bad press that the industry has been getting. “When you read newspaper stories, you only see bad stories about carriers, negative results, 2012 not any better, and so on. So investors are really shying away from our industry and based on the fact that we did not get the volume and revenue in time we decided to pull the plug, otherwise it would be bleeding money we didn’t have,” he said.

AFL ended the service in late April 2012.

AFL had established a $1-million line of credit with Halifax Port Authority, with $500,000 of that amount supported by a loan guaranteed by the Province of Nova Scotia.

AFL spent $500,000 it received from Halifax Port Authority, but never touched any of the half-million dollars guaranteed by the province. AFL also received and spent $200,000 it had borrowed from Portland Port Authority.

Halifax Port Authority Spokeswoman Michele Peveril said in an email that the Port Authority had advanced AFL funds in the early stages of “resurrecting the feeder service,” but she would not confirm the amount.

“There was substantial private investment in AFL, and it was well capitalized. They were a good partner, and we assessed their proposition and were in support based on the people, experience and the capitalization they had in place,” she said.

Peveril said it would be premature to speculate “what, if any loss (by HPA) will result at this early point.”

Neal Alderson, with N.S. Department of Economic and Rural Development, said in an email, “Our investment had not been completed, so no provincial dollars are at risk.”

Mack said AFL, which had signed with five carriers to move cargo through Halifax, needed another estimated $2.5 million to carry the service until it got to the break-even point.

The end of the service leaves several creditors looking to get paid. AFL’s chartered vessel, the 700-TEU ship AFL New England, was placed under arrest and remains in Halifax while legal and financial issues are negotiated. “I don’t know many creditors have put a lien on the ship,” Mack said. “But we are now in discussions with the (ship’s) owners and (their) bank, and hopefully the problem will be solved soon.”

Mr. Mack would not discuss overall losses, but he did put losses by the four private investors at about $4 million. He said any further revenue coming from the carriers, based on the last cargo carried by AFL, will be distributed “fairly among the creditors, and the four partners decided that we will not be part of the distribution. It was a risk we took. It was money we put in, so we have accepted the fact we are losing that money 100 per cent,” he said.

Among those owed money is Cerescorp in Halifax. Cerescorp Senior Vice-President Calvin Whidden would neither confirm nor deny reports that Cerescorp had the vessel arrested, because “we are tangled up in some legal issues right now.” He would not discuss how much money the company is owed, but a Halifax news report said court documents filed by Cerescorp showed the company was owed $264,403.

Whidden said, “In my tenure here over three decades I have seen three or four of these services start up and not be able to make a go of it, so it was not a surprise. I was hopeful it would make it, but it’s not a surprise that it has failed.”

In previous years, Eimskip, Halship Inc. and SPM Marine have all tried to make the feeder service work. Eimskip only operated for a short period and ended the service when the company restructured. Halship and SPM Marine both lost substantial amounts of money.

Tobias Koenig, a German businessman, and one of the investors in AFL, and Mack were quoted in TradeWinds Newsletter, an American shipping industry publication, citing insufficient cargo, uncertain markets and high fuel prices – which were expected to increase even more due to government-regulated low sulphur requirements in the future – as factors in the decision.

Mack told Halifax business newsletter, allnovascotia.com, that February had been the best month since start-up, carrying 570 TEUs. However, April figures dropped to 300 TEUs, and May looked even less promising.

AFL had greater plans to build a number of ships and operate feeder services along the U.S. East Coast, but those plans have also ended.