Rickmers Maritime Trust

[Nick]

I recall that all 3 shipping trusts used to depreciate their vessels based on a lifespan of 10 years, a conservative measure assuming an actual lifespan of 20-30 years. Sometime during the crisis, depreciation was re-pegged to 30 years instead. I reckon its to spruce up the expenses being recorded.

10 years is just too short and extremely aggressive. It doesn't reflect the true valuation of the vessel. FSLT does something like that and it makes it difficult to understand its balance sheet. 20-30 years will be more accurate. Courage Marine has 25-30 year old vessels plying trade routes while Mercator Lines has a 17 year old vessel plying a 13 year contract. But again, it depends on the quality of maintenance and type of vessel used.

Personally, a 25-30 year depreciation policy with the assumption of zero scrap value should be sufficient.