Mercator Offshore Finds Success in Syndication

KOGAS is not the only company to have found success in the syndication market. Mercator Offshore, the wholly owned subsidiary of India’s second largest private sector shipping company Mercator Lines, has raised USD 155 million in a syndication deal led by sole bookrunner ICICI Bank. What is perhaps most interesting is the fact that all participants in this transaction are domestic banks. ICICI Bank contributed USD 80 million while State Bank of India and Indian Overseas Bank committed USD 25 million and USD 20 million respectively. Other participants that include Bank of Baroda and Indian Bank held USD 15 million a piece. The six year loan is priced at 500 bps above LIBOR and the proceeds will be used to partly finance a jack-up rig. In addition, ICICI Bank will be providing Mercator with an additional USD 35 million eight year revolving and term loan facility. Continue Reading

DBS Finances Oiltanking Odfjell Terminal Singapore

Oiltanking Odfjell Terminal Singapore Pte Ltd has signed a 6 year syndicated term loan facility of SGD 200 million (USD 138 million) via a club deal by DBS Bank Ltd, Calyon, and Oversea-Chinese Banking Corporation Limited. DBS Bank Ltd was the sole Bookrunner. The proceeds from the 6 year facility will be used to refinance existing loans and to finance the company’s expansion project on Jurong Island. OOTS is one of the very few companies in Asia who has been able to successfully tap the syndication loan market for a facility with tenor of more than 5 years.

Oiltanking Odfjell Terminal Singapore Pte Ltd is a 50/50 joint venture between Oiltanking GmbH and Odfjell SE. OOTS, incorporated in December 1999, owns and currently operates a 226,000 cubic metre (cbm) chemical storage terminal in Jurong Island.

BTMU Supports Trada Maritime

Trada Maritime has successfully secured USD 35 million from Bank of Tokyo-Mitsubishi (“BTMU”) for the acquisition of new vessels this year. The Indonesian shipowner hopes to secure additional loans from another foreign bank and two Indonesian banks for more ship acquisitions. Local media reports also suggest that the company is planning to issue bonds worth 1.5 trillion rupiah (USD 150 million) next year for capex needs and has an ambitious plan to spend USD 315 million to purchase vessels over the next five years. Last September, Trada made its debut on the Indonesia Stock Exchange and raised Rp 500 billion (USD 54 million). The management’s ability to execute its expansion plan in today’s economic downturn will soon be put to the test.

All Eyes on China

In the last edition of Marine Money Asia, we reported that Yantai Raffles has secured USD 150 million from China Development Bank. This week, we have another transaction that involves a Chinese bank supporting Chinese shipping interests. Bank of China (“BOC”) has sealed a cooperation agreement with state owned China State Shipbuilding Corporation (“CSSC”).

Under the terms of the agreement, BOC will provide CSSC a credit line of RMB 80 billion (USD 11 billion) to support the latter’s businesses in shipbuilding and ship repair. In addition, BOC will leverage on its buyer credit business to support CSSC’s exports. BOC has been an instrumental player in the development of the Chinese shipbuilding industry. All in all, the bank has provided domestic shipbuilders with over RMB 130 billion (USD 19 billion).

Half Full or Half Empty?

China has almost single handedly supported the whole dry bulk market despite the world economic gloom. While the BDI marches forward largely due to the tight Capesize tonnage supply, it remains anyone’s guess if this frantic pace of iron ore chartering will continue to last. Will China’s USD 585 billion stimulus package whet the country’s appetite for commodities when infrastructure project spending picks up steam? Or is this just pure stockpiling speculation and a bear market rally?

In the meantime, there are increasing concerns that China’s recovery may come at the expense of inflating asset bubbles, increasing economic volatility and burgeoning bad bank loans. Latest figures showed that China’s new lending doubled to RMB 664.5 billion (USD 97 billion) in May from RMB 318.5 billion a year earlier and industrial output rose by 8.9% year on year. Ma Jun, chief China economist with Deutsche Bank AG in Hong Kong described the pace of bank lending as dangerous but there are also those who beg to differ. In a recent report entitled “The World’s Largest Local Banks, The Largest in the World”, analysts at Taifook Securities believe that the concerns over asset quality deterioration appear exaggerated. The securities house says the current infusion of credit actually eases the liquidity crunch for many medium sized private enterprises, thereby providing an opportunity for highly leveraged sectors, notably property, to restructure their balance sheets. Whatever the case may be, we expect regulators to scrutinize new lending more closely to deter speculation. Continue Reading

Bank Debt – 04/26/2007

It’s All About Yield

In contrast to our musings on Ultrapetrol, the importance of yield cropped up in Jefferies’ review of Arlington Tanker’s first quarter. Mr. Douglas Mavrinac writes, “…we expect the increased investor interest in well-protected yield instruments to continue given the inverted yield curve and collapse of the sub-prime mortgage sector. Consequently, we believe well-secured tanker yield names such as Arlington should continue to trade higher given the relative attractiveness of the projected yields compared to other yield-orientated investment instruments, such as MLPs which are currently offering less attractive yields.” Continue Reading

Bank Debt – 04/12/2007

Risk Indicator?

Everyone who studies markets has a favorite indicator of market direction or risk. Based upon a recent loan syndication, we may have a new one. It is our understanding that AIG Commercial Equipment Finance Inc. (“AIG”) went up-market and participated in the Fortis-run $770 million Senior Secured Credit Facility for Aker American Shipping to the tune of $50 million. This facility provided the permanent financing for the company’s ownership of the first ten vessels, which are bareboat chartered to OSG and then long-term sub-chartered to major oil companies for use in the Jones Act trade. Based upon the OSG bareboats, we also understand that pricing was in the range of LIBOR + 150 bps which was then swapped out. Continue Reading

Debt – 02/22/2007

Odfjell ASA Refinances

We learned today that Odfjell successfully launched a new NOK 600 million floating rate bond with a 3-year tenor. The first tranche of the loan will be NOK 300 million with closing to be on March 19th. The bonds will be listed on the Oslo Stock Exchange. Continue Reading

Playing with Debt & Equity – 01/04/2007

OOIL’s $480 million Sale Leaseback with HSH

Anyone who has ever taken classical economics has seen the downward sloping line that is intended to represent the relationship between pricing and demand (i.e. as price goes up, demand falls). A business could from there extrapolate where to fix a price so as to maximize profit. A really successful business, however, could fix the price at each consumer’s willingness to pay so that the business could receive the highest price possible in each sale while each and every consumer in the market willing to pay at least cost could afford as much of the product as he desired.

This is all a very convoluted way of saying that in an ideal market all players could buy or sell as much as a given commodity as they desire at precisely their willingness to pay. The $480 million transaction that HSH Nordbank has structured for Orient Overseas (International) Limited (OOIL) is a transaction that does just that for risk, ownership and optionality. Not all details have yet been disclosed though we understand it was priced and structured in such a way as to be attractive to all parties involved. Continue Reading

SMBC Builds up Shipping Group