[MOL] Message to Citadel Group

[Suvorov]

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Mitsui O.S.K. Lines, Ltd.
株式会社商船三井
Private

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To: Maurice Davidson (@Dutchy)
Cc:
Subject: ITS

Dear Mr. Davidson,

We are writing this message concerning the future of ITS. The ITS fleet has grown considerably since we began this endeavor and our cash reserve has grown despite several acquisitions. This has demonstrated that this project has had some success. That being said, our ship building business has been reduced dramatically with ITS serving as our only client. We wish to reopen our shipbuilding services to the world allowing for direct purchasing. We feel some customers are unwilling to undertake a lease arrangement when they have the cash to buy these ships outright - allowing them more simple and straightforward use of the ships. Per our original discussions, there was to be no formal bar to our direct sales capability, but we wished to allow ITS time to grow without competition and so voluntarily ceased our sales initiative. Direct sales and lease agreements are not necessarily direct competitors either, and it is totally feasible that some customers may want low-cost leases while others purchase. However, there may be a large realm of overlap between those customer bases and MOL would prefer to not compete with itself.

As our valued business partner, we wish to discuss the matter with you before we open international sales again.

Regards,
Yoshikazu Kawagoe,
Senior Managing Executive Officer,
Chief of the International Sales Department

 

[Dutchy]

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Citadel Group
Private​

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To: Yoshikazu Kawagoe, Senior Managing Executive Officer of Mitsui O.S.K. Lines, Ltd. (@Suvorov)
Cc:
Subject: ITS

Mr Yoshikazu Kawagoe,

I can understand the situation your business finds itself in, would you be available for a phone call any time soon as I feel it would be much more efficient to communicate in that manner.

Respectfully,
Maurice Davidson
Vice President & Chief Executive Officer
Citadel Group

 

[Suvorov]

With the invitation to call, Yoshikazu immediately picked up the phone to call Citadel Group at the numbers they had provided. He called and waited to be patched through to Maurice. Yoshikazu had several papers with projections and possibilities in front of him. The biggest concern for MOL was to maintain positive relationships with Citadel Group.

@Dutchy

 

[Dutchy]

Upon receiving the call, Maurice Davidson ensured that the line was private before answering. "Good afternoon, thank you for contacting me so swiftly. So I've come to understand, and correct me if I'm wrong, that you wish to discuss the reopening of your companies sales of merchant vessels?"

@Suvorov

 

[Suvorov]

@Dutchy

“Good afternoon, my friend. Yes, you are correct. We wished to give ITS some time to grow before we resumed our international sales.we wished to discuss this with you before we did, 1) to inform you and 2) to discuss possible ramifications on ITS. The Japanese government has been the primary customer of ITS for some time now but they have informed us that they will be direct purchasing ships from here on out and will not renew any leases. We are concerned about the future of ITS without the Japanese government’s patronage. Combined with direct sales of ships, this may place ITS in a dangerous position.

We know that sales and leases may serve different customers so there isn’t a direct competition but it may hurt the business. That being said, the Japanese government has proposed that we possibly dissolve ITS. This is not a firm position, but a consideration. We would value the company based on physical assets and cash reserves. We are more interested in the ships than the cash and so we would first offer leases ships for sale to customers, then value the ships under Japanese leases and the cash in the account splitting the value. Of course, if you do not feel concerned about our direct sales and loss of Japanese customers in the near future, ITS could keep in operation. The demand for leases has been somewhat lacking, unfortunately.”

 

[Dutchy]

"I can understand the need to reopen your shipbuilding industry, and with the rise of competitors I empathise with your position. I am proud with how ITS has developed over the last year and even prouder of the cooperation between our two businesses. While the closure of ITS would mean the end of our current cooperation, I am sure there will be plenty more business opportunities in the future."

"Having glanced at the recent business analysis on ITS, I believe the time has come to close the business in a controlled manner. As long as our customers are treated rightfully then you have our full support in liquidating the company."

@Suvorov

 

[Dutchy]

@Suvorov

 

[Suvorov]

“Very well, then we are in agreement. As we look to a division of the company, we have a strong preference for the physical ships, especially the ones we are currently using for trade. As the keeper of our finances, we hope you can propose an equitable division acceptable to us both. We can advertise the ships currently under lease for sale to their current leaseholders. If they will not purchase them, Japan can make use of those ships.”

@Dutchy

 

[Dutchy]

"My accountants have looked into the situation and have come with the following numbers:

Total Worth: $1,107,600,999.97
Total Assets: $440,814,000.00
Total Liquidity: $666,786,999.97
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Citadel Liquid Share: $553,800,499.99
MOL Liquid Share: $112,986,499.99

If you are in agreement with these numbers, then ownership of the vessels will transfer to MOL, with $112,986,499.99 in cash. The remainder of the liquid assets shall be transferred to the Citadel Group."

@Suvorov

 

[Suvorov]

"Very well. One question: Does this take into account outstanding leased vessels or only available vessels and those under Japanese lease? We will have to resolve those assets as well. It is Japan's preference for the physical assets, rather than their monetary worth."

@Dutchy

 

[Dutchy]

"My apologies, I see we have been using outdated ship numbers. I have amended the numbers:

Total Worth: $1,445,100,999.97
Total Assets: $778,314,000.00
Total Liquidity: $666,786,999.97
---------------------------------------
Citadel Liquid Share: $666,786,999.97
MOL Liquid Share: -$55,763,500.02

As you can see, due to the value of the vessels, MOL will be required to pay $55,763,500.02 in cash to Citadel if you wish to acquire all ITS vessels."

@Suvorov

 

[Suvorov]

“I believe the Netherlands is utilizing one of the ships for its own trade. Has that been factored in or do these numbers already reflect the Netherlands keeping one ship?”

@Dutchy

 

[Dutchy]

"We have been made aware that their trade route has expired, so we'll simply refund their contract and allow you to keep possession of the vessel. I've also made the transfer from ITS to Citadel, we now simply await your transfer and then we can confirm your ownership of all the vessels."

@Suvorov

 

[Suvorov]

“Please be aware that we have transferred the funds from our government as a means to recover on the loan they issued for the formation of this company. They have taken possession of the ships. We will resume our regular shipbuilding operations. Please let us know if there are any questions. We thank you for working with us and we wish you all the best.”

@Dutchy