USD 495 million Debt Raised?

The remarkable turnaround in the container shipping sector in 2010 has led to a significant improvement in the banks’ appetite for containerships. Just as Neptune Orient Lines announced the firm financing offers it received for its new boxships, Evergreen Marine had no problem raising debt for its ships either.

The Taiwanese operator raised USD 330 million bank debt from a syndicate of domestic banks that was led by mandated lead arrangers Chang Hwa Commercial Bank, First Commercial Bank, Land Bank of Taiwan and Mega International Commercial Bank. The seven year shipping loan was priced extremely favourably at 85 bps over three-month LIBOR and was made up of four USD 82 million tranches, which we believe will be used to pay for four 8,000 TEU boxships. Three other Taiwanese banks – Chinatrust Commercial Bank, Hua Nan Commercial Bank and Cathay United Bank were also roped in as participating lenders. Continue Reading

Japanese Regional Banks: Potential Sources of Liquidity?

In Japan, the three mega banks – Mizuho Financial Group, Sumitomo Mitsui Banking Corporation and Mitsubishi UFJ may be the market leaders in the country, but there is some anecdotal evidence that regional Japanese banks are now showing greater interest in ship finance. Regional banks particularly in the Shikoku and Setouchi areas remain as an important source of funding for the domestic shipowners and many of them have established dedicated ship finance departments to deliver better service to their shipping clients in recent years.

According to a series of articles published by Marine Net, although some of these traditional lenders have reportedly reached their lending limits allocated to the shipping industry, they are now exploring the possibility of working together with other regional banks that are unfamiliar to the industry on syndicated transactions, to
circumvent the problem of the lack of liquidity. Others are taking the opportunity to increase their exposure to ship finance. Continue Reading

Indian Banks Step Up

We are heartened to note that Indian banks are stepping up financing activities for their shipping clients. India’s largest private sector shipping company, Great Eastern Shipping, had secured a USD 25 million 9.25 year term loan from three Indian banks, led by AXIS Bank. The loan priced at 360 bps over LIBOR and the proceeds will be set aside for capital expenditure. State Bank of India (Mauritius) and Bank of India were the other two participants.

The country’s second largest private sector shipping company, Mercator Group, found similar success with the domestic lenders. Mercator Offshore (Nigeria) inked a USD 79 million six year term loan facility arranged by AXIS Bank. The loan was guaranteed by Mercator Lines and was priced at 335 bps over LIBOR. Bank of India, Bank of Baroda and DBS Bank were the other participants. Continue Reading

Export-Import Banks in Action

Export finance continues to be a major source of financing for the shipowners and the momentum appears to be gaining pace. According to local reports, the Export-Import Bank of Thailand (“EXIM Thailand”) has announced plans to lend at least THB 18 billion (USD 563 million) to local shipping companies in their acquisition of new tonnage. The government hopes that the latest measures will help to expand the Thai fleet and reduce reliance on foreign carriers, and in turn generate more foreign exchange earnings for the country.

EXIM Thailand has the ability to offer direct loans or arrange syndication deals with its financial partners for the domestic shipping companies and is looking at extending loans of up to THB 18 million over the next three years. In January 2010, Precious Shipping secured a credit facility granted by EXIM Thailand and other lenders including Bank of Tokyo Mitsubishi UFJ, Bank of Ayudhya, Kasikornbank and Thanachart Bank for the acquisition of bulk carriers. Continue Reading

ECA to the Rescue

Undeniably, export credit agencies (“ECAs”) has played an important role in satisfying part of the financing gap needed by the shipping industry. In China, China Exim Bank plays an instrumental role in supporting the maritime industry, having granted shipping/shipbuilding related loans of over RMB 102.5 billion (USD 15 billion) in the domestic currency and USD 7.45 billion in greenback at the end of 2008. In 2009, the policy bank extended a USD 389 million, 12 year secured facility to New York listed Overseas Shipholding Group (“OSG”), in its first ever loan facility to a US company. It would be nearly impossible to secure a 12 year ship finance loan today, let alone this quantum from a single financial institution. Continue Reading

Bank Debt Returns to Normalcy?

One of the major concerns on the minds of many would be the pile of toxic collateralized mortgage paper that remains on banks’ balance sheets and this will continue to restrict the banks’ ability to extend new credit. Likewise, shipping banks face the same tricky task of valuing the shipping assets on their books based on current market prices. Basel II requires banks to set aside more capital to riskier assets whenever the security cover reduces, and this could potentially limit capital for lending. The process of writing down book values has yet taken place and moving forward, it is absolutely crucial that bank losses on shipping remain limited or the industry could risk losing a number of lenders. There has already been a material contraction in ship lending capacity among major shipping banks.

2009 has been a busy year for the ship financiers, not so much for lending but more in terms of restructuring and workouts. Lending terms as one would expect have become more stringent in 2009 and not only has the advance rate been lowered to 50-60%, banks prefer shorter tenors between 3 and 5 years. This is in stark contrast to the 10 to 12 year tenors banks were offering shipowners during the shipping boom just a couple of years back. Bankers call this a return to basics. Continue Reading

In a Sweet Spot

Demonstrating once again that state-owned shipping companies have no lack of access to funds, China Shipping Group has signed a strategic cooperative agreement with Bank of China in Shanghai last week. The Chinese banking conglomerate will provide China Shipping a RMB 80 billion (USD 11.7 billion) credit line and this is the third agreement that China Shipping Group has concluded with the domestic banks. Continue Reading

The Funding Gap

How large exactly is the funding gap? Many numbers have been thrown out in the media and this week, we have an estimate from Nordea. George Whist, Head of Shipping and Oil Services – Asia, pointed out that the global orderbook has doubled between 2007 and 2009 and is worth at least USD 350 billion as of 2009, based on his calculations. The demand for capital has never been higher and owners are predominantly from Asia and Europe. In terms of DWT, number of vessels or number of owners, all indicators show that European and Asian owners control in the region of 80% of the world fleet.

Analyzing the supply side of the equation with data from Marine Money, he observed that shipping banks have increased their loan exposure to shipping from USD 187 billion to a staggering USD 346 billion between 2006 and 2008. European banks have been ramping up their balance sheets with shipping debt, not just for the European owners but also for those in Asia. “Banks who are interested in shipping deals have halved and it is not fair to expect the European banks to fund the world’s ships. We need to get a balance. We need to get more money working from Asian banks,” he said. Continue Reading

The China Story

The hammering and digging begin at sunrise and last well beyond sunset. Beneath the dust and dirt, Shanghai is making ready for its quest to become an international financial centre and shipping hub by 2020. Gazing at the iconic view of the Bund and the Pudong skyline across the Huangpu River, it is not hard to understand why Shanghai is a natural choice as a maritime hub. Ideally located on China’s east coast and the major East West trade routes, Shanghai serves as a major transportation hub for the Yangtze River Delta and is China’s most important gateway for foreign trade. Marine Money trotted to this magnificent city last week to understand the current challenges faced by the Chinese shipping community.

Much has been written in the press on the central government’s aggressive support for the shipyards, highlighting concerns that the excessive state financial intervention could endanger the commercial viability of many ocean shipping companies going forward. The government is well aware of the problem of overcapacity in the shipping sector, but at the same time, it simply cannot allow her core shipyards to fail. The economic and social costs will be too overwhelming to manage. But if we take a closer look, many measures introduced by the central government in reality are largely tailored for the more established shipyards and very few financial incentives have been rolled out for either the small and medium local shipowners or the smaller shipyards. Continue Reading

Watson, Farley & Williams LLP Advises in High Profile KOGAS Project Financing

The Singapore office of Watson, Farley & Williams LLP (“WFW”) advised on the high profile Korea Gas Corporation (“KOGAS”) refinancing for three 1999 built LNG carriers.  The 138,200 cbm built LNG carrier “Hanjin Muscat” is on bareboat charter to Hanjin Shipping Co., Ltd, the 138,100 cbm built LNG carrier “SK Summit” is on bareboat charter to SK Shipping Co., Ltd. and the 135,000 cbm built LNG carrier “Hyundai Technopia” is on bareboat charter to Hyundai Merchant Marine Co., Ltd.  All three LNG carriers are operating under long term contracts of affreightment with KOGAS. Continue Reading