TeraSea Inks USD 53 million Buyer’s Credit from JBIC

TeraSea, a joint venture between Singapore listed Ezion Holdings and Seabridge Marine, has secured a USD 53 million export credit loan from Japan Bank of International Corporation (“JBIC”) and Sumitomo Mitsui Banking Corporation (“SMBC”).  Nippon Export and Investment Insurance (“NEXI”) will provide a 6 year USD 26 million buyer’s credit insurance to cover the loan granted by SMBC. NEXI typically insures up to 95% of the lender’s commercial risks and up to 97.5% of political risks.

Proceeds of the facility will be used to fund the construction of two ocean towing/salvage tugs at Japanese shipbuilder Universal Shipping Corporation. These vessels are usually deployed to set up large off-shore platforms such as floating production storage and offloading (“FPSO”) or drilling rigs for oil/gas exploration projects.

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Dryships Seals Chinese Finance

When Chinese premier Wen Jiabao made his maiden state visit to Greece in 2010, there was rising optimism among the Greek shipping community that Chinese banks would loosen their purse strings and expand their loans in Greek ship finance. And indeed, there were promising signs that there could be more deals in the making. During the visit, a USD 5 billion Sino-Greek shipping finance fund was established to facilitate the sale of Chinese built ships to Greek shipping companies and shortly after, the Angelicoussis Group and Diana Shipping became the first two Greek shipping clients of China Exim Bank. Cardiff Marine also announced the signing of a USD 74 million loan from China Development Bank (“CDB”). This could be the first transaction entirely provided by a Chinese bank. But since then, the pace has been rather unhurried, with only a few shipowners – Costamare, Danaos and Toisa securing financing from the Chinese lenders, mainly the policy banks.

On February 13, George Economou-led Dryships sealed a USD 122.58 million export buyer credit syndication facility from CDB. The facility is part of the USD 5 billion shipping fund and proceeds will be used to finance three 206,000 dwt very large ore carriers (“VLOCs”) that will be built in Shanghai Jiangnan Changxing, a subsidiary state-owned shipbuilding conglomerate CSSC. CDB will provide Dryships the bulk of the facility, but Bank of China – Ningxia branch and Zhejiang branch will also participate as a minor lender for an undisclosed sum. OceanFreight, acquired by Dryships in November 2010, ordered three VLOCs at USD 68 million apiece due for delivery between 2012 and 2013. XRTC acted as Project Advisor while the law offices of Norton Rose and Papadimitriou & Partners were the legal advisors. This transaction also marks the successful closing of the
first syndicated loan facility between two Chinese banks, without the involvement of a Western bank.  Continue Reading

Precious Shipping Raises USD 145 million from Thai Banks

It is common knowledge that the global shipping industry is facing an increasing scarcity of traditional debt financing. The lethal combination of low freight rates, high bunker costs and overcapacity are pushing more owners closer to the edge, especially those who are overleveraged and/or have depleted equity accumulated during the heydays. Shipowners who face finance shortage over their committed ship orders are searching for alternative sources of capital. Export finance and private equity come into mind, but it is not easy for owners to meet the demanding requirements imposed by these capital providers. Capital markets on the other hand provide some fund-raising opportunities, but they are largely restricted to the bigger names and issuers are subjected to the mercy of the broader market sentiments.

But for the owners in Asia, it’s not all doom and gloom. Many European banks are seeking to rebalance their lending portfolios, through reducing exposure in Europe and increasing lending activities in Asia. Asian banks are also expected to continue supporting shipping clients with good track records, business models and manageable debt levels. Continue Reading

Stanford Marine Goes Islamic with Standard Chartered

In December 2011, Standard Chartered led and participated in a USD 175 million senior secured club loan facility for United Arab Emirates based Stanford Marine Group and its subsidiary, Stanford Asia Holding Company. The transaction was closed amid critical challenges with most European shipping banks retreating, on the back of the Eurozone crisis, which led to a tightened USD liquidity pool and rising USD cost of funding. In order to overcome the difficulties, this club deal was uniquely structured to accommodate for Islamic and conventional dual currency (USD and AED) financing to attract regional liquidity.

The transaction combined a conventional ship finance term loan and a commodity Murabaha Shariah compliant facility, sharing a security pool of 21 vessels through a security trustee arrangement and a set of common terms agreement.  Murabaha financing is widely used by the Islamic banks as a contract of sale between the bank and its client for the sale of goods at a price plus an agreed profit margin for the bank. This form of cost plus financing circumvents the restrictions in Islam, whereby banks are not allowed to operate on the basis of interest. Continue Reading

Wintermar Offshore Taps IFC Loan

On Tuesday, Indonesian offshore company Wintermar Offshore Marine signed a USD 45 million with IFC for the expansion of infrastructure services in the country’s oil and gas industry. IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector.

IFC’s loan to PT Wintermar Offshore Marine Tbk, the largest Indonesian provider of support vessels to the domestic oil and gas industry, will assist in funding the company’s plan to add 15 supply vessels to its fleet over the next two years. The expanded fleet will support the exploration and development of new offshore oil and gas fields, particularly in eastern Indonesia, to help the country meet growing energy needs. The gradual implementation of cabotage regulations and rising activity level in the Indonesian offshore energy industry have led to higher demand for Indonesian-flagged offshore support vessels. Continue Reading

Wallenius Wilhelmsen JV Builds and Finances in Japan

Norwegian operator Wilh. Wilhelmsen ASA has recently signed a new USD 55 million buyer’s credit agreement with Japan Bank of International Cooperation (“JBIC”). The Norwegian operator will use the proceeds to finance the construction of a pure car/truck carrier (“PCTC”) ordered at Mitsubishi Heavy Industries (“MHI”) in 2010. JBIC will commit USD 27 million to the facility, with the remaining amount to be co-financed by Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. Nippon Export and Investment Insurance (“NEXI”) will provide the commercial lenders buyer’s credit insurance of USD 27.4 million that covers 97.5% political risks and 95% commercial risks.

The vessel is one of the two PCTCs that Wilh. Wilhelmsen and partner Wallenius Lines ordered in 2010. Wallenius Lines’ Singapore subsidiary secured similar funding agreement with JBIC and NEXI for its PCTC back in September 2011. BTMU was the sole arranger in that particular transaction. Each vessel has a capacity to transport 6500 car equivalent units and will be sister vessels of ten PCTCs delivered from MHI in the period 2004-2009. Continue Reading

Shipbuilders Get Domestic Support

China Rongsheng Heavy Industries (“China Rongsheng”) has proved to be a clear favourite among Chinese banks, after securing (yet again) another massive facility with China Development Bank (“CDB”). On 22 December 2011, the Hong Kong listed shipbuilder signed a USD 100 million loan facility with CDB, Hong Kong branch. The offshore USD dollar loan marked a significant milestone for CDB Hong Kong that was set up in 2009 as the bank’s launch pad to serve Chinese enterprises
internationally.

One of Taiwan’s largest private shipbuilders, Jong Shyn Shipbuilding, had also found similar success with the domestic lenders, having inked a TWD 1.2 billion (USD 39.7 million) five year syndicated facility through joint bookrunners and mandated lead arrangers – Taichung Commercial Bank, Taiwan Business Bank, and Taiwan Cooperative Bank. Agricultural Bank of Taiwan, Bank of Kaohsiung, Bank SinoPac, Chang Hwa Commercial Bank, Cosmos Bank Taiwan, Hua Nan Commercial Bank and Shanghai Commercial & Savings Bank took part as participants.  Continue Reading

HMM Seals USD 500 million Debt Facility

Hyundai Merchant Marine (“HMM”) has demonstrated that even during times of economic uncertainty, reputable ship owners with good track records are still able to tap the banking market. Last Tuesday, HMM concluded a USD 500 million syndicated debt facility led by DNB Bank. Other participating lenders include ABN AMRO, Credit Agricole, Korea Finance Corporation and Korea Development Bank. The facility will be used by HMM to fund the construction of five mega container vessels being built at Daewoo Shipbuilding & Marine Engineering which are scheduled to be delivered throughout 2014.

DNB says the latest transaction underlines the bank’s continued commitment to shipping throughout the cycle. In an earlier report, J.P. Morgan analyst Sofie Peterzens pointed out that the bank is well positioned to absorb potentially higher shipping losses from a profitability and capital perspective. With only 7.7% of total lending to shipping, a well diversified loan portfolio and LTVs averaging 60-75%, Ms Peterzens believes that DNB’s exposure to the sector is manageable.

Banking Crisis? Not an Issue for BW Group or NOL

2012 is broadly expected to be challenging for both shipping lenders and borrowers. As long as the Euro debt crisis persists and continues to worsen, capital will become increasing scarce. Even shipping companies at the top of the pyramid are busy strengthening their balance sheets and making sure that they have adequate funds to meet capital expenditure requirements in the coming years.

One of the world’s leading maritime companies BW Group has successfully completed a USD 1.5 billion seven-year revolver in mid-November. According to market sources, the proceeds will be used for refinancing and the participants are largely from the previous revolving facility. Pricing is said to be “slightly higher” than the previous revolving facility, although it remains highly competitive in today’s tight market conditions. Continue Reading

KAMCO – A White Knight for Korean Shipping

There are many intrinsic reasons for governments in Asia to formulate policies to support their domestic shipbuilding industry, either through direct loans to the yards or their clients. The shipping sector, however, has in sharp contrast, failed to benefit in the same way, with the exception of South Korea. As a resource-poor country, South Korea recognizes shipping as strategically vital to the nation’s economic wellbeing. During the Asian financial crisis in the late 1990s, cash strapped Korean shipping companies sold 112 ships at distressed prices to foreign buyers and as a result, the country had to grapple with the repercussions from the loss of its national fleet. This painful lesson has strengthened the nation’s determination not to allow history to repeat itself, at a time when shipowners are once again facing huge challenges on multiple fronts including a weaker demand due to the current acroeconomic uncertainly, capacity glut across all vessel types and rising bunker costs.

Armed with the mission to assist in the restructuring or liquidation of distressed assets, Korea Asset Management Corporation (“KAMCO”) has been playing a vital role in alleviating domestic shipping companies from a liquidity crisis. In 2009, the state-run financial restructuring agency established a maritime fund, designed to help shipping companies reduce their capital costs on their vessels. Since then, KAMCO has acquired 27 vessels of over USD 720 million directly from the shipping companies. This strong (and unprecedented) support for the shipping sector has allowed South Korean shipping companies to weather the after-effects of the Lehman crisis. Continue Reading