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It’s a Start
FBR Capital Markets circulated an interesting chart this week. It clearly shows some of the extraordinarily successful quarters shipping and its bankers enjoyed over the past four years. It is nothing new that the party stopped third quarter last year, or that the number of new IPOs shrank dramatically in ‘08. It is striking though the number of shipowners who went into the follow-on market heavily in advance of the complete economic collapse to shore up equity debt ratios.
TOPS Turvy
In its 4th quarter and year-end report, Top Ships (“Top”) disclosed the uncertain state of its debt obligations due to a breach of certain loan covenants. It is currently in discussions with all its lenders to obtain waivers extending to March 2010. Without waivers, the company must classify its debt as short-term, since it is due and payable within the year. As a consequence of cross-default provisions, it requires agreement from all of its banks, a tough position to bargain oneself out of as the last holdout effectively cuts the deal. The company’s lenders include: RBS, HSH Nordbank, DVB, Alpha Bank, and Emporiki Bank.
For the Right Credit, Anything Is Possible
Euronav announced this week that it has signed a $300 million senior secured facility with Nordea, Calyon, Societe Generale, Bank of America and Scotiabank acting as lead arrangers; Nordea, Calyon and Societe Generale acting as bookrunners and Nordea as sole facility agent. Skandinaviska Enskilda Banken, Dexia Bank, Fortis Bank Belgium and Ethias acting as co-arrangers. The credit facility will finance two VLCCs: the Olympia (2008 – 315,981) and the Antarctica (2009 – 315,981 dwt) and four Suezmaxes: the Cap Felix (2008 – 158,764 dwt) and the Cap Theodora (2008 – 158,800 dwt) and two newbuilding Suezmaxes: hull 1743, to be named Felicity, (159,000 dwt) and scheduled for delivery in June of this year and hull 1744, to be named Fraternity (159,000 dwt) scheduled for delivery in November of this year.
Norwegian Bonds Bloom
Despite rising default rates and a cessation of activity late last year, the Norwegian bond market, according to Nordea’s Credit Research, has thawed with total issuance during the first quarter of NOK 14.7 billion, compared to NOK 4.4 billion in the comparable period last year and, most critically, NOK 14.7 billion for the full year in 2008. There have been 19 issuers this year of which two are new to the market. The market is dominated largely by investment grade, with high yield accounting for only 3% so far in 2009 as opposed to 40% in 2008. This reflects a strong appetite for longer-dated utilities and investment grade corporates. Despite the small showing, Nordea still views the high yield market as largely closed with activity limited to some small convertible issues that are mainly sold to existing shareholders at favorable terms.
The only shipping bond issued thus far in 2009 was done in March by I.M. Skaugen SE (“Skaugen”) who completed a dual tranche offering comprising a 13-month NOK 175 million (~$26 MM) senior unsecured FRN priced at NIBOR+600 bps and a 13-month $10 million senior unsecured FRN priced at LIBOR+600 bps. The repayment obligation on the former has been swapped to U.S. dollar. Both notes mature on April 15, 2010. At current U.S. interest rate levels, the average interest cost for all the outstanding bonds is 5.3%. The proceeds from the bonds were used to buy back bonds that matured this year at par.
Finance for Asian Shipping
The availability of ship financing and alternative sources of capital was the central theme revolving Sea-Asia’s conference yesterday. Referring to a slide that illustrates the impact of banks writedowns on their market capitalisations (see below), Dagfinn Lunde, Member of the Board of Managing Directors of DVB Bank SE, pointed out that even though the traditional ship financing landscape has changed dramatically, there is still money available from banks. He told the crowd that DVB, DnB NOR, Nordea, Nord LB, Fortis and some Greek banks are open to different extents and it is possible to put together club deals between USD 100 million to 120 million today. “If you have the words ‘energy’ or ‘offshore’ in your project, even some US banks are still willing to lend,” he added. Continue Reading
Food for Thought
Sea-Asia 2009 kicks off in Singapore this week and Marine Money Asia had the pleasure to participate in the series of conferences to hear from industry leaders on where they think the markets may be heading. We present some notes from the event.
Li Zhen, Assistant President of Sinotrans Group is in the opinion that it will be difficult for many private shipyards particularly in Jiangsu, Zhejiang and Fujian provinces to secure special support from the central government. State-owned shipyards are the main beneficiaries from the government’s assistance programme. Continue Reading
Kanasashi Heavy Industries Files for Creditor Protection
Financially troubled Japanese shipbuilder Kanasashi Heavy Industries (“Kanasashi”) told creditors in a closed-door meeting that it will carry on with the construction of five newbuildings. The medium sized shipbuilder has filed for creditor protection with the Shizuoka District Court two weeks ago after failing to secure more funds from its bankers. Kanasashi, which has a 25-ship orderbook including 33,000 dwt bulk carriers ordered by Hong Kong based Uni-Asia Finance (“Uni-Asia”), Denmark’s ID Shipping and J Lauritzen, used to specialise in fishing boats but ventured into the construction of larger sized cargo ships in the past few years. Continue Reading
Pacific Shipping Trust Faces Charter Rate Renegotiations
Last week, Pacific Shipping Trust revealed that one of its two charterers, Compania Sud Americana de Vapores S.A. (CSAV) has requested a temporary reduction of charter hire payments of about 30%. The Chilean container company has recently appointed HSH Corporate Finance – a subsidiary of HSH Nordbank AG to oversee a restructuring plan to raise USD 750 million and it hopes to capitalise USD 400 million from its outstanding charter commitments with the shipowners. Continue Reading
China Exim Flexes Financial Muscle
The global financial crisis has accelerated a dramatic shift eastward in the centre of ship finance as the traditional European banks continue to struggle to put themselves together. European financial institutions have long been important lenders to the international shipping community but with many of them placed under state ownership, banks may be dictated to on how much and to whom they can lend. Market rumours suggest that some lenders are already in talks to sell some chunks of their shipping loan portfolios at a discount so as to boost their capital adequacy ratios.
This stands in sharp contrast to China where shipbuilding has been identified as one of its ten pillar industries. Banks in China are stepping up their lending activities to support the sector currently in doldrums. According to the latest figures released by the People’s Bank of China, new loans extended by Chinese banks across all industries including shipping and shipbuilding grew to RMB 4.58 trillion (USD 670 billion) in the first quarter of this year. This is the third straight month new yuan-denominated loans exceeded RMB 1 trillion. Continue Reading
Opportunity Gains and Losses From the Time-Chartering Decisions
New York’s Shipping Intelligence led by Sydney Levine issued a short report this week built off the firm’s more than two decades worth of commercial data, both vessel values and charter rates. The report measured the performance of several shipping concerns for theoretical gains or losses from time chartering decisions.
The data is based upon publicly available reports, which can be wrong, but the report provides another data point in performance measurement. While the daily numbers can be quite small as will be seen over time small numbers become huge.
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