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A First Ever – Safe Bulkers Accesses Japanese ExIm Financing
Safe Bulkers, Inc. had entered into credit agreements with Japanese governmental financial institutions in the amount of USD 122.4 million to finance three Japanese newbuilding Post-Panamax 95,000 dwt bulkers. One of the vessels delivered last year with the other two expected to deliver in 2011 and 2012.
Structured in accordance with OECD approved credit schemes, the financing is repayable over 12 years and has very competitive financing terms. Interest is likely calculated based upon Commercial Interest Reference Rates, which in the case of dollar loans is based upon U.S. Treasuries. The loan agreement was concluded with the Japan Bank for International Cooperation and Citibank Japan Ltd, acting as lead arranger. Insurance for approximately half of the amount was provided by Nippon Export and Investment Insurance, the official ECA of Japan. Continue Reading
Why Wait? – OSG’s Forward Start Revolver
Last week, Overseas Shipholding Group, Inc. announced it had entered into a $900 million unsecured forward start revolving credit that matures on December 31, 2016. The company may begin to borrow under the facility on February 8, 2013, the date on which OSG’s current facility expires. With an interest rate of LIBOR + 2.75%, the new facility incorporates the same financial covenant package as the original facility as well as an “accordion feature”, which permits an increase in total availability of up to $1.25 billion through additional bank subscriptions prior to the start date. Even with the accordion feature, the availability is less than the original facility it replaces.
Asian Liners Get Their Game On
Soaring bunker prices have motivated container liners to re-examine their strategy with a renewed focus on operating efficiency, cost reduction and high fleet utilisation. When market leader Maersk Lines announced its plans to pay USD 1.9 billion for 10 new generation 18,000 TEU vessels, it totally changed the rules of the game and has to some extent prompted other major carriers to look into ordering larger and fuel efficient vessels. Today, there appears to be some form of consensus among liner companies that they would need big ships that are over 10,000 TEUs to ply the Asia Europe trade by 2015 and possibly the Trans-pacific trade by 2020 to stay in the game. At the same time, some liner companies have also expressed their intention to build and own vessels to replace chartered-in vessels, so as to maximise their ability to manage excess capacity. During the shipping downturn, liner companies have realised that the decision to layup or sell vessels becomes much easier if they own the ships themselves.
At Marine Money’s conference in March, Kenneth Cambie, Executive Director and CFO of Orient Overseas International (“OOIL”), told delegates that he believes that container shipping is entering a watershed and it will be clear over the next six to nine months who is in the game and who isn’t. He reckoned that those players with the access to capital will be ordering larger ships and preparing themselves for 2015. The spate of newbuilding orders and the seeming lack of capacity discipline among liner companies have sparked market concerns, but while we leave the arguments and controversies to the industry experts, we agree with Mr. Cambie that the access to capital has become increasingly important to survival and in this aspect, Asian liner companies have the competitive advantage. Continue Reading
Bitter Pills to Swallow but Recovery Nearer in Sight
Over 12 months of negotiations and uncertainty, Rickmers Maritime has finally reached an agreement with its lending banks and sponsor, Rickmers Group. Who would have thought that the decision to acquire ships with long term charters from the major liners during the good days could exert such a severe impact on the trust’s performance? After all, during the boom investors focused largely on growth but this has led to the challenges that shipping trusts are facing today in the form of deflated asset values and lease rates. Rickmers Maritime has two pressing issues to resolve – a) a USD 130 million top-up facility that matured in April 2010 and b) an obligation to acquire 7 vessels from the sponsor with total contract value of USD 918.7 million.
In terms of loan restructurings, Rickmers Maritime’s lenders believed to be Citibank, DBS and HSH Nordbank have agreed to convert the balance amount of the USD 130 million facility into a five-year amortising loan and the value-to-loan covenants will be waived by all the lending banks for up to three years. In addition, the trust can take comfort that no market disruption clause will be invoked during the wavier period. But in exchange for the loan extension and temporary covenant waivers, the trust is required to prepay USD 59 million in FY 2010 and accept a revised interest rate of 1.75% per annum over three month LIBOR, which represents increases of between 55 bps and 105 bps on its existing borrowings. Unitholders will also have to live with the decision that the trust can only make quarterly distribution payments of up to 0.6 US cents per unit, provided no event of default has occurred under any facility. Continue Reading
London calling. London calling.
…. more education about shipping is key to attract investor appetite in London.
Marine Money returned to London after a long absence to host a wonderful 1st annual conference on 21st January 2010. This was the first of 14 Marine Money conferences for 2010 and we got off to a cracking start. Over 180 delegates and speakers attended with about one third coming from overseas.
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We Have Not Yet Gotten Past Restructurings
K-Sea Transportation Partners announced last week that late in December, its subsidiary, K-Sea Operating Partnership had entered into amendments of both its revolver and term loan facilities. The revolving credit facility is led by KeyBank, Bank of America, Citibank, Citizens Bank and HSBC. The amendment to the revolver provides for a reduction of the lenders’ commitments from $200 million to $175 million, subject to a maximum borrowing base equal to 75% of the orderly liquidation value of the vessel collateral, and eliminates the $50 million accordion feature. In addition, the agreement calls for the acceleration of the maturity date by 2 years and additional security. The fee to amend the agreement was $1.275 million.
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Step Up Asian Banks
As we fill in our deal tables week after week, we note that anecdotal evidence points towards local banks increasing their financial support to their domestic clients. In Thailand, Thoresen Thai Agencies (“Thoresen Thai”) has secured a USD 200 million three year term loan from a syndication of mainly Thai banks – Kasikornbank, Krung Thai Bank, Export-Import Bank of Thailand (“EXIM Thailand”) and Mizuho Bank, Bangkok Branch. We gathered that the pricing is set at 250 bps above LIBOR and the facility will be used to expand the company’s business in transportation, energy and infrastructure.
Thoresen Thai’s subsidiary Hermelin Shipping is currently in the process of acquiring Unique Mining Services (“UMS”) which is expected to be completed by mid December. The credit line will certainly come in handy if Thoresen Thai is able to make a full acquisition of UMS, estimated to cost at least THB 4.5 billion (USD 135.6 million). Established in 1994 and listed in the Market for Alternative Investment of Thailand since 2004, UMS is involved in the coal trading business through importing coal to the various industrial customers in Thailand. Continue Reading
Spring Awakening (with apologies to the Broadway show)
After being in hibernation or at least in the doldrums, the finance markets are showing signs of activity this week. First out of the blocks, Seaspan gave a double barrel blast. Last Friday, Seaspan announced it had entered into a new term loan facility in the amount of $235.3 million to finance the acquisition of two of its previously acquired 13,100 TEU vessels. The facility was fully underwritten by Sumitomo Mitsui Banking Corporation at a weighted average rate of 0.70% over LIBOR. It is important to emphasize the fact that it was fully underwritten and that the rate, albeit low, was above their historic average weighted cost of below 0.60%. Moreover, Seaspan notes that they now have sufficient credit agreements, with locked-in attractive rates, to fully fund the company’s debt requirements for the entire contracted fleet of 68 vessels while leaving an incremental $550 million in immediate liquidity to capitalize on acquisition opportunities.
TBS Increases Liquidity through Bank of America Facility Amendment.
TBS International this week amended and restated its existing Bank of America facility dating back to the summer of 2006. They increased the deal from $140 million (of which $65m was revolving and $75m was in a term loan) to $267.5 million (of which $125m is revolving and $142.5m is a term loan). TBS will initially draw down the full $142.5 million available under the term facility to pay outstanding principal and interest due on its existing facility, pay closing costs and for general corporate purposes.
Euronav Closes $1.6 Billion Facility
The activity at tanker company Euronav in recent months has been absolutely blistering. In December the Euronav was spun off into its own public company, and then during the first quarter it acquired four VLCCs from Metrostar for $477 million and a fleet of 16 tankers from Peter Livanos for about $1 billion, comprised of cash and 20% of Euronav’s equity. The credit facilities have an 8-year maturity, and the company will pay a commitment fee of 0.25% on the undrawn portion of the facility. The company has stated that it plans to operate most of its fleet in the spot market.
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