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Citi and CICC for SITC in Hong Kong – IPO Award East
By Rodricks Wong
In the aftermath of the financial crisis in America, there was the formation of something of an “America Inc.” as firms from AIG to General Motors were bailed out by the government. The was highly controversial among Americans, as it was across the Atlantic in Europe. For much of the world, though, the concept of a business economy that is closely integrated with the state is more widely accepted and extends even to notoriously roguish shipping lines. China Inc. may include COSCO and CSCL, Japan Inc. the likes of NYK and MOL, the list goes on.
As such these companies are quite a lot less roguish than many of their counterparts, and also benefit from implicit state guarantees. This make their access to capital in the domestic market extremely competitive. This can be seen as virtues or vices depending on your perspective. While it encourages a certain higher level of responsibility, at the same time it tends to discourage more competition in the market as older players are universally preferred to and favored over new players. This has the unintended consequence of stifling competition and allowing established players to become less competitive as they enjoy unparalleled access to finance and new business.
The Birth of A Mega Ship FunD – Sovereign (and Public) Equity Award
By Rodricks Wong
On 29 December 2009, a group of investors in China celebrated the inauguration of China Ship Fund (“CSF”) and set sights to grow this shipping fund to RMB 20 billion (USD 3.1 billion) over the next few years. This would be Tianjin city’s second major fund, approved by State Council and the National Development and Reform Commission of China.
Following the inauguration, within a short period of one year, CSF signed shipbuilding contracts for 45 vessels with total investment amounting to over RMB 15 billion (USD 2.3 billion) and is well on track to become a major tonnage provider in China over the next couple of years. Supporting this growth was China Development Bank (“CDB”), which also has a growing ambition to be a major ship financier in China, and has committed USD 1.1 billion to CSF for the acquisition of 30 dry bulkers – 10 capesize, 10 post panamax and 10 supramax vessels. CDB itself has accumulated shipping assets of RMB 26 billion (USD 4 billion), and committed USD 3.3 billion of new money to the shipping sector in 2010.
Shanghai Greenland Energy (Group) Co. Ltd RMB Financing – Editors’ Choice East
By Rodricks Wong
Sometimes a transaction is amazing because in builds on the top of other transactions, long standing relationships and rides an upward market trend into a tremendous show of nearly earth shattering proportions. Other times a transaction merely wedges open a door that was formerly shut, allowing a trickle of light to shine on the costs and benefits of a new way of doing things. This particular deal fits into the latter category; modest in size it crossed other barriers that could have greater implications for the market going forward.
Editor’s Choice Awards West
By George Weltman
There were many non-conforming transactions that came to our attention. They spoke to us differently from our traditional winners. Perhaps it was a different way of looking at things, a new twist, a trend, a lesson learned or simply something buried.
For us, it is the best part of the issue, as we get to use our imagination and have total discretion to recognize what might be lost as mere background noise. And, most importantly it is fun. What follows are this year’s Editor’s Choice Awards.
The Bankers’ Broker – Contribution to Ship Finance
By Peter Mellet
Editor’s Note:
There are some people whose contribution to the industry seems today unremarkable, but at the time was earth shattering. With the passage of time, it became part of the natural order of things; an item to be checked-off. Graham Barnes contribution to the marine insurance business and to ship finance in particular aptly fits this description.
To get a true sense of the person and his accomplishments, we have asked the person who nominated the winner and therefore knows him best to write his professional “eulogy”. What follows is Graham Barnes story as told by his colleague, Peter Mellet.
On a personal note, we can affirm that Graham’s contribution was for us “priceless”. With the assistance of his firm and Peter in particular we are one of a handful of insured’s who collected on a MII claim. The approximately $500,000 we collected made a near total loss palatable and us heroes in the eyes of management.
“We are the ones that need help with insurance!” said a banker hit by the 1975 shipping crash. “What is the use of this so called Swedish Mortgagees Interest Insurance wording conditional upon a final court judgment?” “It’ll take the bank at least four years to get a negative judgement against the owner’s underwriters that could cost the bank more in legal fees and associated costs than the potentially recoverable claim!”
Saluting a Giant – Contribution to Ship Finance: Carl E. Steen, Head of Shipping, Oil Services & International Division, Nordea Bank
By Jim Lawrence
Carl E. Steen is retiring as Head of Shipping, Oil Services & International Division in Nordea Bank in Oslo which he has headed since in effect since 1993 in 2011. He leaves a legacy of powerful support of the shipping and offshore industry, a legacy that leaves Nordea in the envied position as critical lender to the industry.
Nordea’s loan portfolio to the maritime sector, including oil services, stood at about 13 billion euros (US$18 billion) in 2009 – just above 2 per cent of the bank’s total portfolio, really today the perfect size to enable deals and stay clear of any concerns of an over focus.
Teekay, the Bank – Innovation Award
By George Weltman
We’re prejudiced. When we saw this transaction back in July, we knew it was a winner. To describe it as outside of the box is an understatement and therefore it is a perfect fit for this award. It is a product of the times, evidencing that the reduced availability of shipping debt is affecting the cost of capital, the structure through which it is lent and, as result, who provides it. In this instance, what some might view as expensive capital was provided to a shipowner in the form of a loan. And it works.
In a deal structured by Deutsche Bank , Teekay Tankers (“TNK”) drew down $115m of excess capacity under its revolving credit facility and used the funds to provide what is effectively a first preferred ship mortgage bond secured by 2x 2010-built VLCCs owned by TMT, a Far Eastern shipowner. Each of the three year fixed rate first priority loans is in the amount of $57.5 million and will pay a coupon of 9%.
UASC JOL – Leasing Award East
By Nora Huvane
Cultural differences, varying regulatory regimes, unpredictable currencies. There are lots of reasons not to engage in a cross border lease transactions. But then there is the relentless endeavor to find the best-suited, most competitively-priced source of capital in the world.
Leave it to DVB to assemble just such a transaction between a leading Middle Eastern operator United Arab Shipping Company (UASC) and Japanese Corporate Investors. The transaction, closed in June 2010, achieved the financing of 101,015 TEUs of standard dry containers for a total amount of USD 125 million, equivalent to 100%. This was broken down into two tranches, the first of USD 49 million on a 5-year lease, and the second of USD 76 million on a 6 year lease. The two tranches together resulted in 100% financing.
Middle East Meets West – Leasing Award West
By George Weltman
Nominations in this category were few and far between. Whether it was a conspiracy of silence or largely quiescent KG and K/S markets, we are not sure. Also limiting leasing activity was the inability to raise leverage, which meant equity returns were not sufficiently inspiring to attract investors. However Pareto proved both assumptions wrong in putting together a noteworthy transaction with Havila. In this instance, Havila wanted to control two 4,900 DWT PSVs that were for sale from the owner who contracted them. An outright purchase was difficult for Pareto due to its substantial orderbook and the resulting stretched banking relationships. Pareto solved the problem by structuring a K/S that would acquire the two vessels with a project cost of NOK 740 million and bareboat charter them to Havila for eight years. The financing consisted of an equity raise of NOK 180 million and senior debt of NOK 470 million shared between DVB and the Norwegian export credit agencies, GIEK and Eksportfinans. And lastly Pareto provided a mezzanine piece of NOK 90 million. In defense of our thesis on a lack of bank debt, we would note it is a lot easier to arrange bank debt with ECA credit support and a subordinated loan underneath. For the investors, the projected IRR was 20%, an attractive return for this structured deal.
Brazil Again! – Project Finance Award
By George Weltman
With the discovery of pre-salt oil and the subsequent increasing importance of Brazil as an oil producer, Brazil and project financing have become synonymous. The assets, whether drilling rigs, FPSOs or offshore supply vessels, are expensive and in great demand there and, in some cases beyond the capacity of the local contractors. Project financing solves that problem by combining asset-based financing with a hell or high water contract that provides the contracted cash flows which will repay the debt.
This year there were two strong nominees and we just could not pick a winner. So for the first time in our memory, we have a draw. No cop out; we challenge you to declare a winner from these two.
The Official Guide To Marine Finance Providers
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