BLT Subsidiary Launches USD 147 million IPO

Investor sentiments worldwide may be jittery but this has not dampened Berlian Laju Tanker (“BLT”)’s ambition to list its subsidiary Buana Listya Tama on the Indonesia Stock Exchange. Right after the completion of a USD 93.5 million sale & leaseback agreement with Standard Chartered in March and a USD 685 million refinancing package with six lenders (DnB NOR, Nordea, Standard Chartered, ING, NIBC and BNP Paribas), the chemical tanker owner and operator is now setting its sights to enhance its liquidity position even further by selling up to 7.26 billion new shares or close to 40% of the enlarged share capital in its wholly owned subsidiary Buana Listya.

The objectives for the spin-off are straight-forward. By itself, BLT is already a listed company on the Indonesia Stock Exchange and Singapore Exchange, and the listing of its subsidiary Buana Listya will give the group financial flexibility and the access to the capital markets for debt and equity funding via two separate listed entities. The spin-off will also allow the group to
streamline its operations and better position itself for the domestic and international markets. BLT will focus its resources on growing its business as a provider of global seaborne transportation of liquid cargoes mainly the chemical sector (other than Indonesia) while Buana Listya will focus primarily on energy related shipping services serving the oil, gas, FPSO and FSO and chemical sectors throughout Indonesia. And this clear mandate to expand business within Indonesia is exactly what makes Buana Listya an attractive investment. Continue Reading

Standard Chartered Inks Sale and Leaseback with BLT

On Wednesday, Berlian Laju Tanker completed a sale and leaseback transaction with Standard Chartered Bank’s leasing division, involving four stainless steel chemical tankers. This transaction follows BLT’s recent USD 685 million landmark refinancing facility in which Standard Chartered was one of the six participating banks.

The transaction value of USD 93.5 million entails the lease of four chemical tankers for 7 to 11 year bareboat basis of which three of them are already in operation with the remaining one to be delivered within the coming weeks. Kevin Wong, Finance Director of the Company, remarked in an announcement to the stock exchange that the transaction reflects the company’s unremitting commitment to continuously improve its balance sheet and cement its relationship with Standard Chartered which he described as “a rare bank that combines a strong balance sheet with a depth of knowledge in the shipping industry with a broad financial portfolio.” Incidentally, Standard Chartered was also one of four bookrunners in the company’s rights issue in 2010. 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

Picking up Distresed Assets and Private Equity

John Kennedy has a quote: “When written in Chinese, the word “crisis” is composed of two characters-one represents danger, and the other represents opportunity.” But even as the shipping markets in general remain in doldrums, there have been surprisingly few mergers and acquisitions in the market, contrary to what one might expect. The lack of liquidity and funding from the banks could be a reason. Or could it also be that market watchers are still holding on to the view that asset prices have yet to hit rock bottom? So whether it is this fear of catching a fallen knife or the lack of financing and quality investment opportunities, seasoned shipping investors and private equity firms remain largely on the sidelines. There were few public distressed situations this year and this could well suggest that banks are working very hard with their clients to avoid foreclosures, rather than accepting haircuts on assets. Continue Reading

The Importance of Self Preservation

In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading

Fun Raising Continues

As economists struggle to reach a consensus on whether the global economy has indeed begun a sustainable recovery or this is simply a slower pace of contraction, investors are just befuddled by the strength and endurance of the present stock market rally. But one thing is for sure, shipping companies are wasting no time in taking advantage of this broad-based improvement in market sentiment.

In Japan, Mitsui O.S.K. Lines (“MOL”) issued two series of secured straight bonds – bonds number 11 and bonds number 12 last week and raised over JPY 50 billion (USD 528 million). The first tranche of five year JPY 30 billion bonds carries an annual coupon of 1.278% while the second ten year JPY 20 billion tranche pays investors 1.999% annually. The funds will be used to repay existing borrowings and for the redemption of commercial paper. Both Rating & Investment Information and Japan Credit Rating Agency have assigned AA- to the bonds, acknowledging that the company’s well diversified earnings have a strong capacity to recover in a market turnaround. The bonds, although unsecured, come with a negative pledge. At the same time, the company is said to be in the market for a three year JPY 15 billion (USD 156 million) loan with SMBC as the sole bookrunner. The loan is priced at 30 bp over 6-month TIBOR (Tokyo Interbank Offered Rate). MOL expects some signs of recovery in summer this year and is implementing its JPY 40 billion group-wide cost reduction measures to secure stable long term profits. The ability to secure incredibly low cost funding and execute rapid fleet reduction will prove to be critical for the company emerge stronger in face of the crisis. Continue Reading

A Look At BLT

Indonesian chemical tanker owner Berlian Laju Tanker (“BLT”) has released its 2008 results this week, a balance sheet that we feel should provide some comfort to the stakeholders. Even though investors may be disappointed that net profit has declined 67.6% from USD 76.8 million in 2007 to USD 24.9 million in 2008 and no dividend has been declared, the financial strength of the company has improved as the management pro-actively seeks ways to bring down the debt level through deleveraging plans. BLT sold five vessels and leased back four for 12 years last year, booking USD 50.9 million gains, although one should also note that the company has 15 vessels still under construction as at the end of December 2008, to be completed between 2009 and 2011. 

Since the leveraged buy-out of Chembulk in December 2007, the company’s balance sheet has been placed under tremendous pressure by the high gearing ratio which subsequently led to a breach of covenants on its four rupiah bonds. Net debt to equity gearing ratios based on the latest published numbers was at 1.95 times in 2008 based on USD IFRS accounts, a great improvement from 2.56 times in 2007. This decline in debt is due to the significant decline in the value of its notes and bonds as BLT practices a “mark to market” policy on its notes payable and convertible bonds. Continue Reading