Fairfax Financial Holdings, through certain subsidiaries, entered into a definitive agreement to invest an additional $500 million of equity in Seaspan through the exercise of two tranches of warrants, increasing Fairfax’s total investment in Seaspan to $1 billion.

David Sokol, chairman of Seaspan, said, “Our board of directors and management team are excited by this transformative investment, which will further bolster Seaspan’s strategy to lead consolidation in the fragmented containership sector and capitalize on the most compelling opportunities in the shipping sector and beyond it. Building on our acquisition of Greater China Intermodal Investments and existing partnership with Prem Watsa and Fairfax, the cumulative investment of $1 billion from Fairfax will also significantly strengthen Seaspan’s balance sheet, significantly improve access to capital and accelerate our progress toward achieving an investment grade credit rating. With foundational, long-term oriented partners like Fairfax and the Washington family, we have the opportunity to build on our industry-leading position to drive growth and sustainable shareholder value creation for many years to come.”

The definitive agreement provides that on July 16, 2018, Fairfax will exercise all of the warrants issued to Fairfax on February 14, 2018, to acquire approximately 38.46 million Class A common shares at an exercise price of $6.50 per share. In January 2019, Fairfax will immediately exercise all of the warrants that are issued to Fairfax in connection with the closing of Fairfax’s second debenture investment of $250 million pursuant to the subscription agreement dated March 13, 2018. Upon exercise of the warrants in January 2019, Fairfax will acquire approximately 38.46 million Class A common shares at an exercise price of $6.50 per share, for a total equity investment of $500 million.

In consideration for Fairfax exercising these warrants in advance of their seven year terms, 2025 and 2026 expirations, Seaspan will issue Fairfax seven year warrants to acquire 25 million Class A common shares at an exercise price of $8.05 per share and amend the terms of the debentures that were issued on February 14, 2018 and will be issued on or about January 15, 2019 to allow Fairfax to call for early redemption of some or all of those debentures on each respective anniversary date of issuance to the respective seven year maturity date.

Upon the full exercise of both tranches of warrants, Fairfax’s total investment in Seaspan will increase to $1 billion, consisting of $500 million of Class A common shares and $500 million in debentures.
The definitive agreement provides for customary closing conditions.

“Seaspan has a strong leadership team with a compelling vision and laser focus on execution,” said Prem Watsa, chairman and CEO of Fairfax. “As the global containership industry continues to consolidate, we believe owner-operators like Seaspan, with financially sound balance sheets, will have excellent growth prospects. We are excited about Seaspan’s outstanding progress over the past six months, and with David Sokol’s proven capital allocation and shareholder value creation credentials, we are thrilled to expand our relationship. This transaction represents one of Fairfax’s largest investments in a public company, which is a clear indication of our respect for David Sokol and Dennis Washington.”

Bing Chen, president and CEO of Seaspan, said, “We are honored by Fairfax’s transformative series of investments in Seaspan, totaling $1 billion, over the past five months. We remain focused on deploying capital in a disciplined and value-enhancing manner and pursuing opportunities that best serve our customers and create meaningful returns. The support of Fairfax, the Washington family and our other long-term shareholders is instrumental for us to execute on our strategy and create lasting value for all shareholders.”

Seaspan provides container shipping liners with alternatives to vessel ownership by offering long-term leases on large, modern containerships combined with ship management services. Seaspan’s operating fleet consists of 112 containerships with a total capacity of more than 900,000 TEU, an average age of approximately five years and an average remaining lease period of approximately five years, on a TEU weighted basis.