Asian Offshore & Energy Companies Attracted to Norwegian Capital Markets

Over the past two months, at least three Asia based offshore & energy companies have tapped the Norwegian capital markets. Jasper Explorer, a wholly owned subsidiary of Singapore listed Jasper Investments, raised USD 165 million successfully in secured bonds in May, Asia Offshore Drilling (“AOD”) completed its USD 80 million private share placement this month and this week KrisEnergy, a Singapore based E&P company with First Reserve as the majority owner, raised USD 85 million in a senior secured bond issue. Our sister publication Freshly Minted has provided excellent coverage on the Jasper and AOD transactions and the guts of the deal tables are provided below.

One common thread in the transactions was the role of Pareto Securities as the Sole Lead or Joint Lead Manager. The Norwegian investment bank has been actively involved in a number of equity and debt placements of over USD 4 billion over the last six months. Continue Reading

Hanjin Shipping Completes USD 150 million Convertible Issue

Last Wednesday, South Korean carrier Hanjin Shipping raised USD 150 million from the sale of five year convertible bonds. The bonds were launched with a base issue size of USD 150 million, with a USD 50 million upsize option that can be exercised within the first 30 trading days. Sole bookrunner J.P. Morgan did not exercise the upsize option immediately, even though the book was said to be comfortably covered by demand particularly from Europe.

The coupon and conversion premium were also fixed at attractive levels for the investors, at 4% coupon and a 20% premium, suggesting the investor sentiment remains price sensitive. The convertibles were initially marketed with a coupon and yield ranging from 3.5% to 4% and a conversion premium between 20% and 25% premium over the closing price of its shares on July 6. Continue Reading

Wan Hai Opts for Domestic Liquidity

Wan Hai Lines brought its massive bond issue into fruition and successfully raised TWD 10.4 billion (USD 360.3 million) from its two domestic bond issues in May. In the latest offering, Wan Hai sold TWD 2.9 billion (USD 100.5 million) of six year unsecured domestic corporate bonds at a fixed annual interest of just 1.75%. The bonds were issued at par with a face value of TWD 1 million.

The company was also able to complete the issuance of the first batch of corporate bonds in the same month. The first batch of notes that filled Wan Hai’s coffers by TWD 7.5 billion (USD 259.8 million) was made up of two tranches – TWD 3 billion worth of five year bonds at an annual coupon rate of 1.65% and another TWD 4.5 billion worth of seven year bonds at an annual coupon rate of 1.85%. The bonds were structured with staggered maturity dates to ensure that not too many bonds will come due at the same time and put a strain on company finances. All proceeds will be used to repay existing bank debt and purchase vessels.

Demand for corporate debentures remains healthy in Taiwan due to the abundance of liquidity among retail investors and the island’s low interest rate environment. This works to the advantage of the local shipping companies in the country as they are expected to seek more funds to finance their current shipbuilding programme.

USD 1.2 billion MOL bonds On the Horizon

Japanese mega carrier Mitsui O.S.K. Lines (“MOL”) has applied for approval from the Ministry of Finance to sell up to JPY 100 billion (USD 1.2 billion) worth of bonds. If this comes into fruition, it will be the first shipping bond issuance by a Japanese shipping company since January 2010.

Even though R&I has assigned a high preliminary rating of “AA-” for the bonds and re-affirmed MOL’s issuer rating of “AA-”, the credit rating agency has expressed concerns with the acute earnings fluctuations in the company’s container shipping business and the worsening oversupply situation in the dry bulk sector. “If MOL is slow to improve its financial base due to weak earnings and cash flows, it will be difficult to keep the current credit rating,” it said in a statement. Continue Reading

Asian Shipping Bond Volume Falls 46% in 2010

In 2009, bonds came back in financing vogue for the shipping industry, with total volume in Asia reaching a record USD 7.6 billion. But a few questions have since been lingering at the back of our minds: “Will this trend continue in 2010? And have the investors gotten too far ahead of themselves and forgotten about the painful corporate bond defaults in 2000/2001?”

As we compile our list of shipping bonds concluded in 2010, some interesting findings are revealed. Total shipping bond volume in Asia has surprisingly declined at a larger pace than expected, down by close to 46% to USD 4.1 billion last year from USD 7.6 billion the year before. But before we hastily conclude that the access to bond money is fast disappearing, the sharp decline can partly be attributed to a number of market specific reasons. Continue Reading

Mega Convertible Bond Issue in the Works

Hong Kong and Shanghai listed China Shipping Development is planning a RMB 3.95 billion (USD 602 million) convertible bond issue. That could be the largest convertible offering by an Asian shipping company ever. The oil and bulk carrier division of state-owned China Shipping Group plans to make use of the six year bond proceeds to finance the construction of 19 new buildings – namely three 110,000 dwt oil tankers, eight 48,000 dwt oil tankers, two VLCCs and six 76,000 dwt bulk cargo carriers. The offering is only available exclusively to Chinese investors and existing holders of Shanghai listed shares or “A” shares of the company will be given preferential rights to subscribe for the bonds. The proposed convertibles will be marketed with an annual coupon range of 0.5% to 3% and are expected to be listed on the Shanghai Stock Exchange.

Unlike in many jurisdictions, companies raising money in China are required to list down the intended use of bond proceeds in greater detail and bondholders have a one-off right to ask for a partial or full redemption, should there be any material change. In a statement to the stock exchange, the company said the convertible bond issue will allow the company to pay a lower interest coupon payment than a straight bond issue and would not lead to any immediate dilution of the company’s basic earnings per share which would arise in the case of a new issue of shares. Continue Reading

Corporate Snippets: There Is Money Out There for Ships!

Even though the ship financing environment is widely expected to be cautiously optimistic this year, recent headlines seem to suggest otherwise.

STX Pan Ocean: Last Friday, the Korean dry bulk shipper announced the company is in the process of establishing six special purpose vehicles for the purpose of financing its ships on order. The company will guarantee the debt owed by these SPVs, amounting to USD 358.6 million. The loan agreements will range between 8 to 12 years. Continue Reading

Ningbo Marine Closes First Convertibles in 2011

On Wednesday, Shanghai listed Ningbo Marine successfully sold five year RMB 720 million (USD 109 million) convertible bonds with mandated bookrunner China Merchant Securities and lead manager Guangzhou Securities. The subsidiary of state-owned Ningbo Marine Group – one of the largest domestic shipping companies in China will be making use of the proceeds to finance one 57,000 dwt bulker and three Handymax bulkers. The basic terms of the offering are shown in the accompanying Guts of the Deal.

In a rather unusual fashion, the bonds offer investors different coupon rates every year. In the first year, the coupon rate is fixed at 0.7%, and this will increase to a maximum of 1.6% in the final year. The bonds are convertible into ordinary shares at an initial conversion price of RMB 4.58 (USD 0.69), which is the higher between the average price of Ningbo Marine shares over the last 20 days and on January 4, the day before the prospectus was filed. The conversion price of the bonds will be adjusted if there are any changes in the share capital due to any issues of new, bonus and/or right shares. Continue Reading

Strong Interest for NOL’s Ships

Last Thursday, Neptune Orient Lines (“NOL”) announced that it has received “firm financing offers” from lenders and financial institutions, which have agreed to provide the company a total sum of USD 926 million to partly finance its 12 new containerships. In a statement to the Singapore Exchange, NOL said that the loans will make up about 78% of the cost of the vessels, and the balance amount will be
funded by the company’s earlier bond issue and from internal resources.

In July and August, NOL penned an order for ten 8,400 TEU and two 10,700 TEU container vessels with Daewoo Shipbuilding & Marine Engineering at USD 1.2 billion. The ships, upon delivery between 2012 and 2014, will replace the company’s existing vessels with charter agreements that will expire in the next few years. And in preparation for this massive acquisition, NOL as early in August issued SGD 280 million worth of notes under its USD 1.5 billion Euro Medium Term Note Programme(“MTN”). The 10 year notes, arranged by DBS bank carry a coupon of 4.65% and the net proceeds of the notes were swapped from Singapore dollars into US dollars. Continue Reading

Vinalines Places Bonds for USD 52 million

State-owned shipping and port operator Vietnam National Shipping Lines (“Vinalines”) sold VND 1 trillion (USD 52.08 million) bonds in the domestic markets for vessel acquisitions and new project development. The three year senior unsecured bonds carry an annual coupon rate of 14.5% in the first year, and floating coupon rates in the second and third years, to be computed based on the average 12-month deposit rate plus 3.5% per annum. We understand that domestic banks and investment funds were the primary buyers of these bonds and Standard Chartered Bank was the sole arranger and book runner for the bond issue. Continue Reading