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NEXI steps up support for Japanese shipbuilders
It has been a busy September for Nippon Export and Investment Insurance (“NEXI”), having participated in two ship export transactions. In the first transaction, a group of lenders, comprising Japan Bank for International Cooperation (“JBIC”), Sumitomo Mitsui Banking Corporation and BNP Paribas Tokyo Branch, have agreed to extend loans of JPY 9.4 billion (USD 122.6 million) to Korea’s Hanjin Shipping for the financing of four Kamsarmax bulk carriers. The ships will be built by Tsuneishi Shipbuilding in Japan. In a typical ECA arrangement for Korean shipowners, JBIC and commercial lenders will disburse the loan through Korea Development Bank and NEXI will underwrite the buyer’s credit insurance for the loans provided by the commercial banks.
In the second transaction, NEXI provided a USD 27.5 million buyer’s credit insurance for a loan to a Singaporean subsidiary of Wallenius Lines AB, a major shipping company in Sweden, for purchase of a pure car & truck carrier (“PCTC”) built by Mitsubishi Heavy Industries. The loans are provided by JBIC and the Bank of Tokyo-Mitsubishi UFJ (“BTMU”). PCTCs are designed to carry a spectrum of vehicles including automobiles, trucks, buses, and tall construction/heavy machinery. And just on Wednesday, NEXI participated in a loan provided to Mundra Port & Special Economic Zone limited, Indian subsidiary of Adani Enterprises for the purchase of a tugboat built by Kanagawa Dockyard. JBIC and BTMU were the participating lenders. Continue Reading
STX Pan Ocean Closes USD 510 million Syndication
South Korea’s STX Pan Ocean has secured a USD 510 million 12 year syndicated loan facility with a consortium of nine domestic and international lenders, comprising ABN AMRO, BNP Paribas, China Development Bank, Credit Industrial et Commercial, Deutsche Schiffsbank, DnB NOR Bank, Export-Import Bank of Korea, ING and Standard Chartered.
In October 2010, the company broke new ground and entered into the global pulp transportation market by securing the large consecutive voyage contract with the world’s largest pulp and paper company, Brazil’s Fibria Celulose. To fulfil this 25 year USD 5 billion contract that commences from 2012, STX Pan Ocean ordered 20 pulp carriers from another STX Group company, STX Offshore & Shipbuilding. Proceeds from the latest loan will be used to cover 70% of the total cost in the construction of 16 pulp carriers. Funding for the remaining
four vessels will be secured at a later date.
STX Pan Ocean has been actively raising funds since the start of this year to finance capex requirements through a combination of shipping banks, export credit agencies and domestic corporate bonds. We provide a list of recent transactions in the accompanying table.
COSCO Corp Suffers Analyst Downgrades
Last week, Singapore listed COSCO Corporation suffered multiple analyst downgrades from major securities houses. Analysts were largely disappointed by the weak 2Q11 net earnings and flagged concerns over demand, risk of order cancellations and delivery delays. BNP Paribas Brenda Lee pointed out that even though turnover in 2Q11 was up 3% year-over-year but net profit was down 53% year-over-year to SGD 31.9 million (USD 26 million). The poor operating performance, attributed largely to sliding margins for offshore engineering, shipbuilding, ship repair and conversion, was also aggravated by a higher tax rate due to lower tax-exempt shipping profits and lower deferred benefits.
CIMB Analyst Lim Siew Khee warned that given COSCO’s lack of experience in turnkey offshore projects (including deepwater drillships, tender rigs and jack-up rigs), margins are expected to remain low. “We fear that a history of provisions for lossmaking contracts in shipbuilding could repeat themselves in offshore as these provisions typically surface after projects have reached substantial completion,” she added. Meanwhile, DBS Analyst Janice Chua pointed out that the Chinese shipbuilder will face rising cost and currency pressure. Based on her sensitivity analysis, every 1% increase in steel cost and RMB appreciation could decrease Cosco’s bottomline by 1% and 2.2% respectively. Recent news of Cosco’s Norwegian client Sevan Marine’s potential bankruptcy also fuelled more fears among investors who were already worried about weak orderbook growth and rising costs. Sevan now accounts for 22% of COSCO’s order book, with 3 deep water drilling rigs.
Plop-plop, Fizz-fizz, Oh What a Relief It Is” – TORM Extends
On Wednesday, TORM was able to announce an actual, as opposed to rumored, refinancing of its $900 million revolving credit facility with Danske Bank, BNP Paribas, HSH Nordbank, and SEB which was scheduled to mature in 2013 with a bullet payment of $630 million. Conditioned upon a cash equity raise of $100 million, likely a rights issue, to be completed by December 15th, the banks have agreed to extend the maturity to 2015, when it matures with a bullet payment of $480 million. The difference in the balloon payments of $150 million will be amortized during that two year period. The facility will retain the current covenant package and will include a market value test applicable from 2013 as well as dividend restrictions.
CMA CGM Replicates Hapag-Lloyd Bond Model
Last week, CMA CGM S.A. successfully offered through a private placement, a $909 million equivalent dual tranche senior note issue, which, in many respects, closely resembled structurally last year’s Hapag-Lloyd bond issue led by Deutsche Bank. The offering consisted of a $475 million 8.5% tranche due in 2017 and a EUR 325 million 8.875% tranche due in 2019. Proceeds of the offering will be used to refinance the company’s existing Euro and Dollar denominated bonds and for general corporate purposes. Key terms are shown below in the Guts of the Deal.
Golar Partners Prices While Parent fills Warehouse?
Was it a vote for shipping, for the MLP structure, or Mr. Fredriksen? At the end of the day, it does not matter as the first shipping IPO of 2011 met with strong demand and priced above its range. Last week, Golar LNG Partners LP (“GMLP”) priced its initial public offering of 12 million shares at $22.50, above the stated range of $20 to $22 per share. Total gross proceed were $270 million, which could increase to $310.5 million if the green shoe is exercised in full. The limited partners own a 30.1% interest in the company with Golar LNG Limited owning the 2% GP interest as well as a 67.9% limited partner interest. The final details of the transaction are shown in the Guts of the Deal below.
Seeing the Light – Golar LNG Learns From a Competitor
The MLP model is best suited for assets such as FSRUs and LNG carriers that have stable cash flows due to long-term contracts. The common units of the limited partnerships trade on yield and expected growth. Given the low interest rate environment and high demand for yield paper, the MLPs are trading at high EBITDA multiples and premiums to underlying asset value. The valuation premium gives MLPs a lower cost of capital making it an efficient way to grow and access capital.
Tapping Export Finance – The Danish Way
Over the past year, Danish owners have been extremely successful in tapping export credit agencies to help finance a part of their orderbooks in Asia. In a transaction that has recently come to light, J. Lauritzen had signed a USD 267 million export credit financing agreement with BNP Paribas last November. The transaction was structured by the French bank, who also managed to rope in two other mandated arrangers, Société Générale and Bank of China.
The ten year facility was also backed by China’s Export Credit & Insurance Corporation (“Sinosure”), which agreed to provide buyer’s credit insurance on 95% of the commercial exposure for the ten year loan. Proceeds will be used to finance the acquisition of five product tankers and two gas carriers that are currently being constructed at Guangzhou Shipyard International and Yangzhou Kejin Shipyard respectively. The Singapore office of Watson, Farley & Williams LLP advised the syndicate of international lenders. Continue Reading
An Interesting Combination
Club deals involving multiple financial institutions from the Middle East, Asia and Europe are not common, but United Arab Shipping Company (“UASC”) has demonstrated that raising capital across these regions can still be done today, if you know where to look. Last Tuesday, the container shipper announced that it had secured a USD 302 million term loan facility from a club of four financial institutions to purchase three 13,100 TEU vessels. The vessels are part of a nine-ship order in 2008 at Samsung Heavy Industries shipyard in Korea, valued at a combined total of USD 1.5 billion.
As part of its support for the country’s shipyards, the Export Import Bank of Korea (“KEXIM”) will be financing 70% of the USD 302 million term loan facility and the remaining 30% will be taken up by three mandated lead arrangers – BNP Paribas, Industrial and Commercial Bank of China (“ICBC”) and Ahli United Bank (“AUB”). BNP Paribas is also the structuring bank, the documentation bank, the agent and the account bank. Continue Reading
BLT Receives Backing from 6 Banks
From its humble beginnings as a small local Indonesian tanker operator, BLT’s successful listing in Singapore was catalytic to its transformation into one of the largest chemical tanker owners in the world. Its Singapore listing in 2006 shrewdly placed the company on the radar screens of many shipping banks in the city state, who have shown strong support of its expansion plans both domestically and internationally, despite industry watchers’ concerns that the company could be overly leveraged in pursuit of growth.
On Monday, Singapore listed owner Berlian Laju Tanker (“BLT Tanker”) announced the completion of the largest term facility it has ever completed. Six commercial banks, DnB NOR Bank, Nordea Bank, Standard Chartered, ING, NIBC and BNP Paribas have all committed to provide BLT Tanker USD 685 million in a new landmark term facility. DnB NOR is the Facility Agent and Security Trustee. Continue Reading
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