NOL Raises More Cash – The MTN Way

Neptune Orient Lines (“NOL”) has sold SGD 300 million (USD 243 million) worth of notes under its USD 1.5 billion Euro Medium Term Note Programme. This marks its second note issuance since its maiden SGD 280 million 10 year 4.65% notes in September 2010. The latest offering is SGD 20 million larger in size, but pays investors an annual coupon rate of 4.40% or 25 bps lower than the previous issue for the same 10 year tenure.

The notes are expected to be issued on 22 June 2011 and mature on 22 June 2021. The issuer has the option to redeem the notes, in whole or in part, at any time on or after 22 June 2016. The net proceeds of the notes will be swapped from SGD to USD and used to partially finance the purchase of new containerships in 2011. DBS Bank, Standard Chartered Bank and HSBC are the appointed joint lead managers and bookrunners for the offering. According to DBS, demand for the notes was so robust that the offering was enlarged from its original book size of SGD 200 million to SGD 300 million, after being oversubscribed by more than SGD 700 million. Continue Reading

Boxes Financed!

Orchid Container Finance, a company under major container box lessor Florens Container Corporation S.A., has secured a five year USD 198 million term loan at 185 bps above LIBOR for the sale and lease back of steel dry bulk containers and general purpose containers. The Singapore office of Watson, Farley & Williams were the advisers to the lenders ING Bank N.V., Singapore Branch and DBS Bank Ltd, Hong Kong Branch. Headquartered in Hong Kong, Florens Container Corporation is one of the world’s largest container box lessors.

Raising Money in Asia – The Odfjell Way

Chemical tanker operators have largely posted lacklustre 2010 results amid a very challenging operating environment plagued by over capacity. But despite this, Odfjell’s lenders and financial partners have maintained their faith and support in the company’s business model and strategy. Marine Money speaks to President and CEO Jan Hammer and Vice President – Finance & Investment Sylvia Low on the challenges faced by the Norwegian chemical carrier and terminal operator and its success in tapping financing in Asia.

With a fleet of about 86 owned and chartered chemical tankers and interests in 9 tank terminals at strategic locations around the world, Odfjell is a leading player in the global market for transportation and storage of chemical and other speciality bulk liquids. Odfjell has been consistently delivering positive cash flow in the last ten years prior to 2010, but the company ran into losses in 2010 due to continued weakness in shipping activity and capacity glut. Coupled with impairment costs and taxes, Odfjell recorded a loss of USD 79 million in 2010, compared to a profit of USD 121 million in 2009.   Continue Reading

PST Closes USD 132 million Financing Commitments

Last Friday, Pacific Shipping Trust (“PST”) announced that it has secured bilateral financing commitments for a total of USD 132 million from Oversea-Chinese Banking Corporation, Standard Chartered and ING Bank to fund its acquisition of five new 57,000 dwt Supramax bulk carriers. The ships are contracted with Tianjin Xingang Shipbuilding, part of state-owned China Shipbuilding Industry Company, at a total cost of USD 150 million. By simple arithmetic, the trust has demonstrated once again its ability to secure loans of exceptionally high advance ratios (between 80 – 90%) from its lenders. These ships upon delivery will be time-chartered to Glovis, the car carrier/logistics company under the Hyundai-Kia Automatic group of South Korea, for periods of 8 and 10 years respectively.

The tenors and structure for the new financing arrangements are understood to be largely similar to the loans secured previously from DBS Bank, Malayan Banking and Bangkok Bank, and, more importantly, these bilateral loans are also free from any loan-to-value covenants or financial covenants, very much in line with PST’s standard requirements. In return, the shipping trust will amortise their debt monthly. We view this as another example of banks competing aggressively against one another for the same high quality owners in Asia, which has inevitably resulted in further polarization of the shipowners into two separate groups – one that is extremely well serviced by their bankers and the other that continues to face huge challenges in raising debt.   Continue Reading

A Brilliant Coup for Singapore

Since its introduction in 2004 as a new business model, the business trust has not created the level of excitement initially envisaged by the authorities. The concept of business trusts was conceived after the success of real estate investment trusts and the idea was to provide investors an alternative option to derive an income yield based on the cash flows generated by assets, without any restrictions on the asset type. 

Companies that are expected to securitise their assets via the business trust structure are likely to be asset heavy in nature such as transport and utilities. But despite the efforts in promoting this structure to companies and investors, there has been limited success. Today, you can still count the number of Singapore listed business trusts with your two hands. The three shipping trusts – Pacific Shipping Trust, First Ship Lease and Rickmers Maritime and a couple of infrastructure trusts – CitySpring Infrastructure Trust, K-Green Trust and Macquarie International Infrastructure Fund are among the few business trusts listed on the Singapore Exchange. But all could change for the better if Hutchison Whampoa’s plans to spin off its Southern Chinese port assets go through.  Continue Reading

Corporate Snippets: There Is Money Out There for Ships!

Even though the ship financing environment is widely expected to be cautiously optimistic this year, recent headlines seem to suggest otherwise.

STX Pan Ocean: Last Friday, the Korean dry bulk shipper announced the company is in the process of establishing six special purpose vehicles for the purpose of financing its ships on order. The company will guarantee the debt owed by these SPVs, amounting to USD 358.6 million. The loan agreements will range between 8 to 12 years. Continue Reading

Strong Interest for NOL’s Ships

Last Thursday, Neptune Orient Lines (“NOL”) announced that it has received “firm financing offers” from lenders and financial institutions, which have agreed to provide the company a total sum of USD 926 million to partly finance its 12 new containerships. In a statement to the Singapore Exchange, NOL said that the loans will make up about 78% of the cost of the vessels, and the balance amount will be
funded by the company’s earlier bond issue and from internal resources.

In July and August, NOL penned an order for ten 8,400 TEU and two 10,700 TEU container vessels with Daewoo Shipbuilding & Marine Engineering at USD 1.2 billion. The ships, upon delivery between 2012 and 2014, will replace the company’s existing vessels with charter agreements that will expire in the next few years. And in preparation for this massive acquisition, NOL as early in August issued SGD 280 million worth of notes under its USD 1.5 billion Euro Medium Term Note Programme(“MTN”). The 10 year notes, arranged by DBS bank carry a coupon of 4.65% and the net proceeds of the notes were swapped from Singapore dollars into US dollars. 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

A Noble Breed

Last week, our sister publication Freshly Minted reported on Maersk’s successful EUR 750 million (USD 1.3 billion) five-year bond. This was the shipping conglomerate’s first bond issuance, following a recent equity offering of USD 1.7 billion. In Asia, commodity trading house Noble Group has likewise found tremendous success in raising funds, suggesting that investors and bankers are getting warmed up to investing cash again. 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