Evergreen Marine Inks USD 824 million from Taiwanese lenders

Asian banks, including those based in Southeast Asia, continue to have an appetite for shipping and offshore, but capital is likely to be reserved for the domestic names in their respective countries. Taiwan based Evergreen Marine has announced that it has signed a USD 824 million syndicated loan agreement with nine domestic banks to fund the construction of ten 8,000 TEU post-panamax containerships ordered at Taiwanese shipbuilder CSBC Corp for USD 1.03 billion. The syndicated loan, payable over ten years, was arranged by Bank of Taiwan, Land Bank of Taiwan, Taiwan Cooperative Bank, Taipei Fubon Commercial Bank, E.Sun Commercial Bank, and four other undisclosed financial institutions. The ships are scheduled for delivery between 2013 and 2015.

Precious Shipping Signs USD 106 million Shipping Loan

Despite the current turmoil in the financial markets, Precious Shipping has secured a USD 85 million pre and post-delivery term loan facility from ING Bank and DnB NOR Bank for the financing of four new 57,000 dwt supramaxes. The facility will provide financing of up to 80% of the total acquisition cost of USD 106.2 million, a high loan to value ratio in today’s market. Precious Shipping has previously acquired the shipbuilding contracts last December from the Oswal Group Global, a Singapore based company owned by embattled Australian industrialist Pankaj Oswal.

The ships are believed to be the last of a series of nine supramaxes ordered at Yangzhou Guoyu Shipbuilding by Maruti Shipping, established by Mr. Oswal in 2007. In March 2010, Maruti Shipping took the market by surprise when it committed USD 320 million to invest in nine supramax newbuildings. Plans to take delivery of the vessels were unexpectedly derailed earlier this year when allegations were made against Mr. Oswal that he had used funds from his 65% owned Burrup Fertilisers to pay for Maruti’s expenses. Oswal’s Burrup was subsequently placed into receivership when it could no longer service outstanding debt of USD 800 million owed to ANZ. Subsequent reports suggested that Maruti Shipping had attempted to seek loans from major international banks to refinance its ship orders in Singapore, but to no avail.   Continue Reading

China Rongsheng Heavy Industries Inks Massive USD 1.7 billion Credit Line

We toss around figures like millions and billions so often in our newsletter, but the bulk of the billion-dollar deals really just revolve around China. Just as Yangzijiang concluded a USD 1 billion cooperative framework agreement with Peter Döhle and China Development Bank, another major privately owned Chinese shipbuilder China Rongsheng Heavy Industries has secured a massive RMB 11 billion (USD 1.7 billion) credit line from China CITIC Bank during the same week.

Monetary policy in China is finally normalising after two years of very loose monetary policy and moving forward, tighter regulations and capital controls imposed by the central government will continue to pose challenges for Chinese lenders and affect the liquidity level they have for shipping and shipbuilding. Since 2010, the Central bank has raised the reserve requirement ratio twelve times and according to some industry estimates, as much as RMB 4,140 billion (USD 640 billion) of capital could have already been withdrawn from the market.

The fine-tuning of reserve requirements for individual banks and interest rate hikes have already led to rapidly falling lending and money growth, and we believe the market has not seen the full cumulative impact of the past and possibly further monetary tightening in China. But for now, the credit constraints at the macro-level do not seem to affect the level of support well-established Chinese shipbuilders enjoy from their domestic lenders.

Under such challenging credit tightening conditions, the grant of credit to China Rongsheng Heavy Industries is certainly seen as a vote of confidence in the shipbuilder’s capabilities. RMB 9 billion (USD 1.39 billion) has been earmarked for the construction of a world-class shipbuilding and offshore engineering base and the remaining RMB 2 billion (USD 309 million) will go towards the development of China Rongsheng’s engineering machinery and marine engine building segments.

Sanko Steamship secures post-delivery financing from ING

ING Bank, as commercial lender, and Norwegian export credit agency Eksportfinans ASA, as buyer credit lender, have provided Sanko Steamship a JPY10.98 billion (USD 143.2 million) post delivery financing for the acquisition of three newbuilding platform supply vessels. The platform supply vessels will be constructed at Universal Shipbuilding Corporation in Japan. The Singapore office of Watson, Farley & Williams LLP acted as advisors to the lenders.

DnB NOR looks at Chinese deals

DnB NOR Bank and China Exim bank have jointly provided an eight year USD 147 million term loan to Nan Yi Maritime and Nan Sia Maritime last month. The loan, secured by a first preferred mortgage over the vessels, will be used for the pre and post delivery financing of two VLCCs. In another transaction concluded in August, DnB NOR provided a three year USD 100 million term loan to COSCO Container Lines. This loan is secured in full by a bank guarantee from Bank of Communications and will be used to fund working capital.

NEXI steps up support for Japanese shipbuilders

It has been a busy September for Nippon Export and Investment Insurance (“NEXI”), having participated in two ship export transactions. In the first transaction, a group of lenders, comprising Japan Bank for International Cooperation (“JBIC”), Sumitomo Mitsui Banking Corporation and BNP Paribas Tokyo Branch, have agreed to extend loans of JPY 9.4 billion (USD 122.6 million) to Korea’s Hanjin Shipping for the financing of four Kamsarmax bulk carriers. The ships will be built by Tsuneishi Shipbuilding in Japan. In a typical ECA arrangement for Korean shipowners, JBIC and commercial lenders will disburse the loan through Korea Development Bank and NEXI will underwrite the buyer’s credit insurance for the loans provided by the commercial banks.

In the second transaction, NEXI provided a USD 27.5 million buyer’s credit insurance for a loan to a Singaporean subsidiary of Wallenius Lines AB, a major shipping company in Sweden, for purchase of a pure car & truck carrier (“PCTC”) built by Mitsubishi Heavy Industries. The loans are provided by JBIC and the Bank of Tokyo-Mitsubishi UFJ (“BTMU”). PCTCs are designed to carry a spectrum of vehicles including automobiles, trucks, buses, and tall construction/heavy machinery. And just on Wednesday, NEXI participated in a loan provided to Mundra Port & Special Economic Zone limited, Indian subsidiary of Adani Enterprises for the purchase of a tugboat built by Kanagawa Dockyard. JBIC and BTMU were the participating lenders. Continue Reading

Swiber Seeks Shareholders’ Mandate for Preference Shares Issue

Perpetual securities are uncommon in Asia, but this has not deterred a number of offshore services companies in Singapore from looking into tapping this source of liquidity. Singapore listed offshore services firm Swiber Holdings is seeking shareholders’ approval to allot and issue convertible preference shares, which if converted in full into conversion shares at the conversion price, will not result in the issuance of not more than 40% of the enlarged share capital of the company.

Preference shares belong to a hybrid investment class, which is senior to common shares but are subordinate to bonds. Analysts generally perceive preference shares as a loan to the company, because preference shareholders are not entitled to normal voting rights but are entitled to dividends. In Swiber’s proposed issue, the company is offering convertible preference shares that provide investors the option to exchange for a predetermined number of the company’s common stock. A convertible preference share has features similar to a convertible bond. The differences lie in that preference shares are subordinated to debt of the issuing company and are usually perpetual securities with no maturity date.

Dividends to Swiber’s preference shareholders are cumulative and payable semi-annually at a fixed rate per annum, and there is a built-in dividend step up which may be activated upon events such as the deference of dividends. The issuer may, at its sole discretion, choose to defer dividend payment to the next dividend date. However, during this period, the dividend stopper will kick in and the issuer will not be allowed to declare or pay any dividends, or repurchase or redeem shares ranking junior to the preference shares.

Preference shares are and are not redeemable at the option of the preference shareholders. The issuer has the right but not the obligation to redeem the preference shares on any stipulated optional redemption date, occurrence of a tax event (any change in any tax law or regulation in Singapore) or occurrence of an accounting event (any change in the accounting standards applicable to the company). For the benefit of preference shareholders, preference shares are convertible into fully paid conversion shares during the conversion period. This means that there could be an increase in the number of shares outstanding in the future, and may be earnings dilutive to the existing shareholders. We expect more details to be announced at a later date.

Swiber intends to distribute the preference shares to institutional and accredited investors on a private placement basis and proceeds will be used for general working capital and capital expenditure.

Business as Usual for Now

Shipowners in Asia are bracing for the potential negative repercussions from the worsening banking crisis in Europe. After all, it was not too long ago when the lack of trade finance caused the BDI to plunge to a low of 663 points on 5 December 2008. Thankfully, a quick check with a number of commodity traders has suggested that the situation is still healthy on the ground. Trade finance is still available and cargoes are moving.

Even so, there are increasing worries that the major European shipping banks might no longer be able to continue provide funding to the shipping industry. Financial institutions in Asia and elsewhere have been reducing credit lines and exposures to European banks in the recent months and this have forced many European lenders to swap lines offered by the European Central Bank for US dollars. Bank of China for example is said to have stopped the counterparty dealings with several European banks. And if more banks are to follow suit, European banks will find it even more difficult to raise US dollars due to concerns over counterparty credit risks. Anxiety about the European debt crisis is driving up sharp spikes in the credit default swap spreads on major shipping banks, suggesting that the markets are increasingly cautious about the credit prospects of these lenders. Continue Reading

STX Pan Ocean Closes USD 510 million Syndication

South Korea’s STX Pan Ocean has secured a USD 510 million 12 year syndicated loan facility with a consortium of nine domestic and international lenders, comprising ABN AMRO, BNP Paribas, China Development Bank, Credit Industrial et Commercial, Deutsche Schiffsbank, DnB NOR Bank, Export-Import Bank of Korea, ING and Standard Chartered.

In October 2010, the company broke new ground and entered into the global pulp transportation market by securing the large consecutive voyage contract with the world’s largest pulp and paper company, Brazil’s Fibria Celulose. To fulfil this 25 year USD 5 billion contract that commences from 2012, STX Pan Ocean ordered 20 pulp carriers from another STX Group company, STX Offshore & Shipbuilding. Proceeds from the latest loan will be used to cover 70% of the total cost in the construction of 16 pulp carriers. Funding for the remaining
four vessels will be secured at a later date.

STX Pan Ocean has been actively raising funds since the start of this year to finance capex requirements through a combination of shipping banks, export credit agencies and domestic corporate bonds. We provide a list of recent transactions in the accompanying table.

CNMIEC Offers Preferential Loan to Bangladesh Shipping Corporation

CNMIEC Offers Preferential Loan to Bangladesh Shipping Corporation

Chinese state-owned trading house, China National Machinery Import & Export Corporation (“CNMIEC”), has approached Bangladesh Shipping Corporation (“BSC”) for the sale of 7 vessels worth at least USD 251 million. According to local press, CNMIEC seeks to sell two product tankers of up to 35,000 dwt at USD 43.5 million apiece, two bulk carriers of up to 38,000 dwt  at USD 31 million apiece, two small container ships between 1,100 – 1,200 TEUs at USD 20 million each and an oil tanker at a price tag of USD 62 million to the Bangladeshi national carrier.

CNMIEC will be throwing in a deal sweetener in the form of a preferential loan. The trading house is confident that it will be able to secure a preferential loan of 12-13 years for BSC with a grace period of 2-3 years, at an interest rate between 2.5 – 3.0%. The proposal has been submitted to the government for review.

Bangladesh has been planning to build up its national fleet to reduce reliance on hiring foreign vessels for its imports.