A Merger of Sorts or Eitzen Bulk Builds a Better Platform

Earlier this month, Camillo Eitzen & Co ASA (“CECO”) announced that the respective boards of two of its controlled companies, D/S Orion A/S (“Orion”) and Shipholding Holding A/S (“Eitzen Bulk’), had approved their merger, with Orion as the surviving company. The fact that Orion, a dormant company, is publicly listed on the Nasdaq OMX gave impetus to the transaction by providing a platform for future expansion. Upon approval by the shareholders, it is intended that Orion will change its name to Eitzen Bulk Shipping A/S and will contain all of the bulk activities of CECO, which consists of the ownership of a newbuilding to be delivered but is mainly a trading platform in which it takes vessels on for up to 3 years against cargo commitments.
Continue Reading

Changes at the Helm of PST Management

CEO and Executive Director of PST Management, Mr Alvin Cheng, has left the Singapore based shipping trust to pursue his personal aspirations. In a statement to the stock exchange, PST Management said its board has initiated a search for a new CEO but in the meantime Mr Teo Choo Wee, a non-executive director of PST Management will be acting CEO with effect from December 1, 2009.

Mr Teo, who has over seven years’ experience in the shipping industry, will be seconded from Pacific International Lines (Private) Limited where he is currently the Deputy General Manager responsible for fleet management and the sale and purchase of ships. Prior to joining PIL, he was with Maya Manufacturing & Trading Co Pte Ltd managing vast ranging businesses in the S.E. Asia region and China.

Arpeni Misses Bond Payment

Indonesia’s PT Arpeni Pratama Ocean Line (“Arpeni”) has failed to pay the semi-annual coupon on its USD notes which was due 03 May 2009. The original size of the 8.75% bond issue was USD 160 million, but the outstanding amount is USD 140.85 million. According to Fitch Ratings (“Fitch”), Arpeni has 30 days from the due date to pay the coupon to avoid a default and the credit rating agency believes that the company may have faced a temporary liquidity issue, which could be related to its derivatives contracts. Arpeni has been involved in derivative contracts aimed at managing interest costs and fuel hedges.

Renegotiation Success

Ship Finance International has amended the sale agreement of two Suezmax newbuilds with North China Shipping Holdings to a hire/purchase transaction. The two tankers were previously sold to North China Shipping for USD 109 million a piece and under the new agreement, Ship Finance will accept USD 40.5 million upfront per ship, and bareboat hire of USD 16,700 daily subsequently for 5 years. North China Shipping is obliged to purchase the vessels at USD 40.7 million each after 5 years.

Step Up Asian Banks

As we fill in our deal tables week after week, we note that anecdotal evidence points towards local banks increasing their financial support to their domestic clients. In Thailand, Thoresen Thai Agencies (“Thoresen Thai”) has secured a USD 200 million three year term loan from a syndication of mainly Thai banks – Kasikornbank, Krung Thai Bank, Export-Import Bank of Thailand (“EXIM Thailand”) and Mizuho Bank, Bangkok Branch. We gathered that the pricing is set at 250 bps above LIBOR and the facility will be used to expand the company’s business in transportation, energy and infrastructure.

Thoresen Thai’s subsidiary Hermelin Shipping is currently in the process of acquiring Unique Mining Services (“UMS”) which is expected to be completed by mid December. The credit line will certainly come in handy if Thoresen Thai is able to make a full acquisition of UMS, estimated to cost at least THB 4.5 billion (USD 135.6 million). Established in 1994 and listed in the Market for Alternative Investment of Thailand since 2004, UMS is involved in the coal trading business through importing coal to the various industrial customers in Thailand. Continue Reading

Kuang Ming Shipping Plans IPO

Yang Ming Marine Transport has appointed KGI Securities to look into the listing of its dry bulk subsidiary Kuang Ming Marine Transport (“Kuang Ming”) by mid 2011. The major Taiwanese operator has restructured its dry bulk assets into its 100% owned subsidiary since last October in preparation for an eventual listing on the Taiwan Stock Exchange.

Kuang Ming was established in 1990 initially for ship agency and freight forwarding businesses but was subsequently reorganised to become Yang Ming’s dry bulk subsidiary. It currently operates a fleet of 10 Panamax bulkers and will be adding 12 Capesize and Panamax vessels by 2013. In the first three quarters of 2009, the subsidiary registered TWD 2.9 billion (USD 90.9 million) and is expecting an after tax profit of TWD 1.2 billion (USD 37 million) this year. These figures are in sharp contrast to the nine month net deficit of TWD 10.7 billion (USD 328.9 million) losses posted by its parent, Yang Ming.

Buss Capital Restructures KG Funds in Singapore

Watson, Farley & Williams LLP (“WFW”) has advised three separate Singapore-based partnerships on the restructuring of their container and lease portfolios and USD 1.2 billion of related debt financing in Singapore, to allow the Partnerships to take advantage of Singapore’s Approved Container Investment Enterprise (“ACIE”) scheme, which provides container owners with concessionary tax rates on container leasing and management activities. The Partnerships are owned by German KG funds sponsored by Buss Capital GmbH & Co. KG of Hamburg, Germany.

From 1 April 2008, leasing of containers has been included under the Maritime Finance Incentive (“MFI”) and an ACIE will enjoy either a concessionary tax rate of 5% or 10% on its income from leasing sea containers (by way of operating or finance leases) to onshore and offshore lessees, depending on the level of local business spending and headcount commitments. The management company of an ACIE will also enjoy a 10% concessionary tax rate on its management fee income derived in connection with the management of an ACIE.

MISC Wants it Right

With the strong support from state-owned oil and gas company Petroliam Nasional Berhad (“Petronas”), MISC has announced last week that it plans to raise up to RM 5.2 billion (USD 1.5 billion) via a renounceable rights issue. Petronas, which currently owns 62.67% of MISC, has agreed to subscribe its entitlement in full in proportion to its shareholdings and will take up additional rights shares, should these shares remained unsubscribed by other entitled shareholders.

744 million new ordinary rights issues which represent 16.7% of the enlarged share capital will be sold to existing shareholders on the basis of one rights share for every five existing ordinary MISC shares at an issue price of RM 7.00 a piece. The issue price is a discount of approximately 18% from the theoretical ex-rights price of RM 8.53 based in the 5-day volume weighted average market price of MISC shares up to an inclusive of 20 November 2009. The rights shares will rank pari-passu with all existing MISC shares.

Proceeds will be used for capital expenditure to partially finance projects for floating production systems. MISC says the proposed rights issue will allow the company to raise new capital without diluting existing shareholders’ shareholdings and at the same time lower its debt-equity ratio from 0.57 to 0.45. MISC has currently total borrowings of RM 11.8 billion (USD 3.5 billion).

The offering managed by sole advisor RHB Investment Bank is expected to be closed by the first quarter of 2010.

Reflect Joins Otto

What would you do if you owned a start up company specialising in seismic and geophysical services and looking for more capital for expansion? Debt and private equity might first come to mind, but Pareto Securities has found an interesting funding solution by linking Reflect Geophysical (“Reflect”) with another strategic player, Singapore based offshore marine group Otto Marine.

Reflect is a start-up company incorporated in Singapore in 2008, founded by eight industry experts with combined experience of over 350 years in the marine seismic sector. Otto Marine on the other hand owns a spectrum of businesses ranging from shipbuilding, ship chartering and ship repairing and more importantly, has SGD 115 million in its pockets from its rights issue concluded in the third quarter this year. Reflect would be an exciting opportunity for Otto Marine to move upstream into high value oil and gas services, considering that there are not many such companies involved in the seismic industry in this part of the world. We note that Otto Marine has been actively expanding its business through joint ventures and acquisitions. Till date, it has forged strategic partnerships with ABCmaritime AG, Aries Offshore, GC Rieber Shipping ASA and Go Offshore Australia to leverage on its partners’ expertise and global networks and in the process hoping to build up a source of passive and recurring income. Continue Reading

Safeena Inks Debut Acquisition

To many shipowners, Islamic finance is often perceived as complicated and challenging to tap into in practice. The reasons stem from the fact that any Islamic funding structures will have to be designed to accommodate the differences that Islamic banking has compared to conventional banking. Islamic banking does not recognise the time value of money and is very much based on productive (or real) investment. It also forbids interest but allow profits from business activities. Despite these challenges, we are delighted to observe that Islamic banks are working hard to offer more ship and aircraft financing products.

Readers of Marine Money Asia may be familiar with Safeena – the first Malaysian Islamic shipping fund. Last week, Safeena announced in Singapore that it has acquired its first vessel since its establishment more than a year ago.  Safeena which literally means “my ship” in Arabic, was launched on 28 April 2008, with a committed equity participation from its two sponsors, Asian Finance Bank (“AFB”) and AmanahRaya Investment Bank (“ARIB”) amounting to USD 50 million. The sponsors aim to expand the fund further to USD 300 million through a combination of equity and debt to acquire a portfolio of quality yielding vessels that can provide a stable income stream to its investors. On a related note, we are also extremely excited to hear that AFB is currently working on mandates to advise on major Sukuk issuances by quasi/government related agencies in Korea across all major industries, including the shipping sector.   Continue Reading