Bitter Pills to Swallow but Recovery Nearer in Sight

Over 12 months of negotiations and uncertainty, Rickmers Maritime has finally reached an agreement with its lending banks and sponsor, Rickmers Group. Who would have thought that the decision to acquire ships with long term charters from the major liners during the good days could exert such a severe impact on the trust’s performance? After all, during the boom investors focused largely on growth but this has led to the challenges that shipping trusts are facing today in the form of deflated asset values and lease rates. Rickmers Maritime has two pressing issues to resolve – a) a USD 130 million top-up facility that matured in April 2010 and b) an obligation to acquire 7 vessels from the sponsor with total contract value of USD 918.7 million.

In terms of loan restructurings, Rickmers Maritime’s lenders believed to be Citibank, DBS and HSH Nordbank have agreed to convert the balance amount of the USD 130 million facility into a five-year amortising loan and the value-to-loan covenants will be waived by all the lending banks for up to three years. In addition, the trust can take comfort that no market disruption clause will be invoked during the wavier period. But in exchange for the loan extension and temporary covenant waivers, the trust is required to prepay USD 59 million in FY 2010 and accept a revised interest rate of 1.75% per annum over three month LIBOR, which represents increases of between 55 bps and 105 bps on its existing borrowings. Unitholders will also have to live with the decision that the trust can only make quarterly distribution payments of up to 0.6 US cents per unit, provided no event of default has occurred under any facility. Continue Reading

Indonesian Banks Step Up?

Middle Eastern banks are not the only financial institutions supporting their domestic shipping clients. Indonesia’s Berlian Laju Tanker has reportedly secured several new domestic facilities, including a USD 33 million rupiah denominated facility obtained from Bank Negara Indonesia.

13,100 TEU Ships Financed!

Last week, United Arab Shipping Company (“UASC”) announced that it has inked a KWD 25 million (USD 86.6 million) senior unsecured term bilateral loan from Kuwait’s second largest bank, Gulf Bank. This is the one of a series of facilities sought by UASC that will be invested in its USD 1.5 billion container vessel newbuilding program. Earlier in February, the boxship owner and operator had similarly found success with Middle Eastern lenders in a multi-currency USD 275 million club deal. Appointed mandated lead arranger and coordinating bank Qatar National Bank roped in participants Burgan Bank, Commercial Bank of Qatar and Doha Bank while BNP Paribas was the structuring bank. This facility will be used to finance three out of the nine 13,100 TEU vessels ordered at Samsung Heavy Industries in June 2008.

USAC currently operates 42 container vessels and will expand its capacity to 300,000 TEUs when it takes delivery of the nine 13,100 TEU ships. Suffering from a combination of depressed demand and tonnage oversupply, mega ships are often seen to be inflexible and economically infeasible to operate during the bad times and it remains challenging to secure funds for these vessels. But with its cash rich backers from the governments of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, UASC benefits from its pedigree background and the latest loans demonstrate the strong support regional banks are providing to their shipping clients. Continue Reading

Notes in Demand

Singapore listed marine services provider Ezra Holdings is raising new debt with the advice of DBS and HSBC. The three year USD 100 million unsecured guaranteed financing will comprise fixed rate notes and a transferable term loan facility. What is a transferable term loan? Simply put, it is a bank loan facility that can be traded between lenders. According to the Law of Multi-banking Financing: Syndications and Participations published by Agasha Mugasha, transferable term loan is a form of securitization that allows banks to trade loan assets, with the objective to improve the liquidity of the transferor banks and diversify lending risks.  

No details on the actual split between the two arrangements have been announced but marketing for the notes has commenced on Tuesday, with the institutional investors largely in mind. Proceeds will be used to finance new business opportunities and capital expenditure, possibly to fund the acquisition of the Crusader 2, an ice class DP3 well-intervention vessel. Continue Reading

KAMCO Delivers Impressive Report Card

We are excited to hear from KAMCO Ship Investment Management Corporation (“KAMCO”) that it has signed term sheets for five more shipping funds with a reputable Korean shipping company and for the very first time, a European bank will be providing the senior loans for these newbuildings. KAMCO is expecting to finance 10 more ships and by the end of this year, it will have close to 40 shipping funds under its belt.

During the Asian Financial Crisis in the late 1990s, cash strapped Korean shipping companies sold 112 ships at distressed prices to foreign buyers and the government was determined not to allow history to repeat itself. A year ago, the Ministry of Land, Transport & Maritime Affairs announced that it would spend up to KRW 1 trillion to acquire ships (not more than 15 years old) from local shipping companies in an effort to enhance their liquidity position and more importantly prevent a loss of national wealth. Continue Reading

Precious Shipping

It may not be fresh news anymore, but we thought it would be interesting to take a closer took at Precious Shipping’s USD 250 million featured among Dealogic’s Top 15 Shipping Loans in 1Q2010. In January, Thailand’s dry bulk shipping company Precious Shipping secured a new USD 250 million secured term loan facility with a syndicate of lenders comprising Bank of Tokyo Mitsubishi UFJ (“BTMU”), Bank of Ayudhya, Kasikornbank, Export-Import Bank of Thailand and Thanachart Bank, making this possibly the second largest shipping loan in Asia in 1Q2010. This transaction was led by BTMU’s team in Singapore, which demonstrates the bank’s strategy in using Singapore as a platform to widen its geographical reach.

Precious Shipping will be making use of the loan facility to finance up to 60% of the dry bulk ships (details in the accompanying table). The company has recently concluded its plan to sell its oldest 25 ships and is in the process of rejuvenating its fleet by acquiring younger and bigger vessels. In addition to the two second-hand ship purchases, Precious Shipping has contracted 18 brand new ships at ABG Shipyard in India and signed long term charter contracts for three cement carriers. Continue Reading

A Growing Chinese Ship Financier

Asian banks tend to have a domestic or regional focus with a relatively limited role in global ship finance, but it is always our belief that the crises of global disequilibrium have provided them with the opportunity to gain prominence over the medium and long term. Last year, for the very first time, ICBC reported their shipping loan portfolio figures to Marine Money and we view this as the result of the increasing confidence the bank is eluding in its ship financing business.

This year, we are delighted that ICBC has once again provided us with their shipping loan portfolio figures at the end of 2009, and despite the challenging market conditions, ICBC managed to grow its book by 115% from USD 2.2 billion in 2008 to USD 4.74 billion last year. In terms of assets, bulk carriers form the majority 59.4% in the portfolio while container vessels and tankers took up 19.2% and 16.3% respectively. 2009 was a difficult year but ICBC remained supportive to both its foreign and domestic shipping clients with good track records and sustainable business models. Continue Reading

MEO Club

Amid a spate of ship financing activities happening in Asia, Singapore based Miclyn Express Offshore (“MEO”) was able to secure USD 150 million facilities from an international club of lenders comprising Standard Chartered Bank, WestLB and Oversea-Chinese Banking Corporation. The facilities were used to pay down part of the group’s existing debt and the remainder was paid down out of the proceeds of a simultaneous initial public offering of MEO on the Australia Securities Exchange in Sydney.

Macquarie Capital (Hong Kong) Limited were sponsor and financial adviser to MEO and exited as a principal shareholder of MEO on completion of the listing. The Norton Rose team in Singapore had previously advised the shareholders of MEO on its sale to Macquarie and that role was instrumental in its appointment as lenders’ counsel. MEO was advised by Clifford Chance.

Big Motivation, Jumbo Ambitions

Zhejiang Shipping Group (“ZOSCO”) is working closer to its goal of joining the ranks of COSCO Group and China Shipping Group. The Zhejiang based shipping company has been rapidly expanding its dry bulk fleet over the past year and has recently signed a strategic agreement worth RMB 4 billion (USD 588 million) with Bank of Communications and Bank of Communications Leasing for the financing of 21 bulk carriers of sizes between 27,000 dwt and 57,500 dwt. It plans to expand its fleet capacity to 2 million dwt over the next three years with the eventual goal of reaching 5 million dwt in five years.

And to achieve that objective, ZOSCO is also busy preparing itself for an IPO in Shanghai this year. It plans to sell up to 100 million new shares to raise up to RMB 2 billion (USD 290 million) and the proceeds will be used to acquire 10 capesize newbuildings to be delivered in 2012. Established in 1980, ZOSCO is a subsidiary of state-owned transportation investment enterprise Zhejiang Communications Investment Group. It currently owns and operates 12 Panamax Bulk Carriers and Capsize Bulk Carriers. Continue Reading

Banks Go Nationalistic?

Banks are still very cautious towards lending to the shipping industry. But for it’s not all grim for the shipowners, especially those who are big and established. There are some anecdotal evidence that Asian banks have been stepping up efforts in supporting their domestic shipping clients especially in India, Taiwan, Thailand and Malaysia.

Shipping companies in these countries have ample access to competitively priced loans from their local banks and many of these loans especially in Taiwan and Thailand are structured in the form of club deals. Club deals are preferred because it is a more intimate arrangement with fewer participants and every participant has an equal status, share returns and diversify risks. Syndication deals on the other hand remain difficult to put together due to the recent unsavoury experience banks encountered in reaching a consensus when dealing with covenant breaches in a bigger group. Likewise, demand for syndication deals from Asian owners appears to be lacking and there is a preference to work with bankers they are familiar with. Asian shipowners seem to have been affected by the difficulties created by syndicates during the troubled market.  Continue Reading