Yangzijiang taps Taiwanese Equity

Yangzijiang Shipbuilding is one step closer to the listing of its Taiwan Depository Receipts (“TDRs”) by September this year. The largest private Chinese shipbuilder, which is already listed on the Singapore Exchange, has received all the necessary approvals from Taiwan and has made an application to the Singapore Exchange. Pending approval, it will be the first Singapore listed company to list TDRs in Taiwan. Yangzijiang Shipbuilding hopes to list up to 120 million TDR shares, comprising 100 million new shares and 20 million vendor shares with the objective to boost its existing share valuation and raise more funds for potential acqusitions. Continue Reading

Jasper Taps Bond Market

Last Friday, Singapore listed offshore oil and gas drilling firm Jasper Investments (“Jasper”) announced that it has added USD 75 million to its coffers, with the assistance from DnB NOR Bank ASA and Pareto Securities. The successful closing of this funding exercise will help to allay fears over its financial health previously highlighted by its auditor Foo Kon Tan Grant Thornton. Last month, the independent auditor raised a going concern issue on Jasper, drawing attention that the group’s current liabilities had exceeded its current assets by USD 56.1 million at the end of 31 March 2010.

The company explained that there is no need to be unduly worried, given that its existing current liabilities consist mainly of a loan from a Singapore bank that is secured against a mortgage on the drillship, the “Explorer”. As at 31 March 2010, the amount outstanding under the loan was USD 35 million against independent valuations of USD 280 million to USD 375 million, and therefore the security value is well in excess of the loan provided. Jasper further disclosed that this “local bank” has also increased the credit facility to USD 55 million at the end of last year. We believe that the effective interest rate for the loan is at 5.575% per annum. Jasper has no other third party borrowings other than the bank loan, and continues to receive material support from its controlling shareholders through the provision of shareholders’ loans of approximately USD 201 million. Continue Reading

Indian Banks Step Up

We are heartened to note that Indian banks are stepping up financing activities for their shipping clients. India’s largest private sector shipping company, Great Eastern Shipping, had secured a USD 25 million 9.25 year term loan from three Indian banks, led by AXIS Bank. The loan priced at 360 bps over LIBOR and the proceeds will be set aside for capital expenditure. State Bank of India (Mauritius) and Bank of India were the other two participants.

The country’s second largest private sector shipping company, Mercator Group, found similar success with the domestic lenders. Mercator Offshore (Nigeria) inked a USD 79 million six year term loan facility arranged by AXIS Bank. The loan was guaranteed by Mercator Lines and was priced at 335 bps over LIBOR. Bank of India, Bank of Baroda and DBS Bank were the other participants. Continue Reading

Export-Import Banks in Action

Export finance continues to be a major source of financing for the shipowners and the momentum appears to be gaining pace. According to local reports, the Export-Import Bank of Thailand (“EXIM Thailand”) has announced plans to lend at least THB 18 billion (USD 563 million) to local shipping companies in their acquisition of new tonnage. The government hopes that the latest measures will help to expand the Thai fleet and reduce reliance on foreign carriers, and in turn generate more foreign exchange earnings for the country.

EXIM Thailand has the ability to offer direct loans or arrange syndication deals with its financial partners for the domestic shipping companies and is looking at extending loans of up to THB 18 million over the next three years. In January 2010, Precious Shipping secured a credit facility granted by EXIM Thailand and other lenders including Bank of Tokyo Mitsubishi UFJ, Bank of Ayudhya, Kasikornbank and Thanachart Bank for the acquisition of bulk carriers. Continue Reading

A Relook at Singapore Shipping Trusts

By Rodricks Wong

May 2006 marked an important milestone in Singapore’s quest to become a major international maritime centre when Pacific Shipping Trust (“PST”) made its debut on the Singapore Exchange. Touted as the republic’s answer to Germany’s KG funds and Norway’s KS funds, the shipping trust model offered shipping companies an alternative ship financing solution for their fleet expansion plans and also provided investors with a new asset class for those seeking shipping exposure. First Ship Lease Trust (“FSL Trust”) and Rickmers Maritime joined the fray the following year and plenty of excitement was injected into the sector. But over four years have passed and the euphoria has since worn off as all three shipping trusts faced specific challenges brought by the unprecedented simultaneous collapse of the financial and shipping markets. As the dust settles, is the shipping trust model still relevant today and have the investors lost interest in this investment class?
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The Changing Topography of Ship Finance in China

By Rodricks Wong

Whether it is the 2008 Beijing Olympics, Shanghai’s USD 44 billion World Expo, or the upcoming Asian Games in Guangzhou, China is seizing the opportunity to showcase its ascension into the upper echelons of world economies. Today, China is the world’s largest exporter and second largest importer, and has officially overtaken Japan as the world’s second largest economy during the second quarter of this year. China’s emergence as an international maritime nation is a recent phenomenon, but its influence has been far-reaching. China owns one of the world’s largest merchant fleets worldwide, is the second largest shipbuilding nation, and its banks are gaining prominence in the global ship financing landscape. The current economic environment presents significant opportunities, but is not without challenges. Chinese shipbuilders are facing a slowdown in new orders. Chinese banks are relatively new to ship finance with plenty of room to grow. Small and medium local shipowners are still considered “un-bankable” by the domestic lenders, and the legislative environment remains ambiguous which, in turn, inhibits the growth of alternative sources of capital for the shipping industry.

A decade ago, China’s state-owned sector appeared to be a looming economic disaster, and many Western analysts boldly put forth their predictions on China’s imminent collapse. Over the years, most of them have been proven wrong, and China is one of the few nations to have emerged unscathed from the crises of global disequilibrium from the West. International relations expert Stefan Halper argued in his new book The Beijing Consensus that China’s “market-authoritarianism” model has provided the country with the environment for rapid growth and stability without the messiness of democratic politics. Everything in China is partly commercial and partly government driven, and this is evident when we speak to the banks in Beijing and Shanghai. Yet, while state-owned companies may still be domineering, the government is exposing them to cutthroat competition to ensure that they remain competitive.
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