GMF Launches Badaro #14

Global Maritime Financing (“GMF”) has successfully closed its latest ship fund under the Ship Investment Company (“SIC”) Act in South Korea. This could well be the first SIC created since the financial crisis broke out in 2008. Market reports suggest that the fund Badaro No. 14 Ship Investment Co. raised 72 billion won (USD 63 million) and acquired a newbuilding 180,000 DWT Capesize bulk carrier at Sungdong Shipbuilding & Marine Engineering. The vessel upon delivery in May 2011 will be chartered to Hyundai Merchant Marine under the bareboat charter hire purchase (“BBCHP”) structure.

40% of the financing comes from a junior loan provided by local institutional investors and underwritten by Mirae Asset Securities while the remaining 60% is satisfied by a 5 year senior loan from Calyon (now rebranded as Crédit Agricole Corporate and Investment Bank). Korea Exim Bank provided the refund guarantee for the newbuilding. Continue Reading

Written by: carisk | Categories: Asia, Bank Debt | February 26th, 2010 | Add a Comment

A Silver Lining in the Bond Market

For the fortunate few, there lies the silver lining in the bond market. Records were shattered in 2009 in the Asian shipping bond arena with over USD 7.26 billion in new issuances. This is a historical high which represented an over 350% increase from USD 1.59 billion in 2008. Clearly, the need for capital has never been stronger as companies grit their teeth against the harsh operating environment.

Transactions in the Asian shipping bond market ran the gamut from the simplicity of straight unsecured issues to the complexity of Islamic debentures. Korean shipping companies top the list, by issuing bonds with 1-3 year maturity and interest rates of 7-8%. Hyundai Merchant Marine, Hanjin Shipping, STX Pan Ocean, SK Shipping, Korea Line and EUKOR Car Carriers have all tapped the bond market more than once this year, having raised over USD 2.9 billion in total. Top Korean issuer HMM raised KRW 1.06 trillion (USD 899.9 million) through eight bond issuances between February to November this year. Continue Reading

Written by: carisk | Categories: Asia, Bonds | December 31st, 2009 | Add a Comment

Bank Debt Returns to Normalcy?

One of the major concerns on the minds of many would be the pile of toxic collateralized mortgage paper that remains on banks’ balance sheets and this will continue to restrict the banks’ ability to extend new credit. Likewise, shipping banks face the same tricky task of valuing the shipping assets on their books based on current market prices. Basel II requires banks to set aside more capital to riskier assets whenever the security cover reduces, and this could potentially limit capital for lending. The process of writing down book values has yet taken place and moving forward, it is absolutely crucial that bank losses on shipping remain limited or the industry could risk losing a number of lenders. There has already been a material contraction in ship lending capacity among major shipping banks.

2009 has been a busy year for the ship financiers, not so much for lending but more in terms of restructuring and workouts. Lending terms as one would expect have become more stringent in 2009 and not only has the advance rate been lowered to 50-60%, banks prefer shorter tenors between 3 and 5 years. This is in stark contrast to the 10 to 12 year tenors banks were offering shipowners during the shipping boom just a couple of years back. Bankers call this a return to basics. Continue Reading

Written by: carisk | Categories: Asia, Debt, Loan | December 31st, 2009 | Add a Comment

Asian Shipping Bond Issuances Hit USD 7.3 Billion In 2009

With bank debt being still hard to come by, the bond market for shipping companies in Asia continues to be active with transactions that ran the gamut from the simplicity of straight unsecured issue to the complexity of Islamic debentures. Bonds have become an extremely important source of capital for both shipbuilders and shipping companies in Asia and many are still working hard to seize this fund raising opportunity before any sudden changes in investors’ risk appetite. Continue Reading

Written by: carisk | Categories: Asia, Bonds | December 17th, 2009 | Add a Comment

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

Written by: carisk | Categories: Asia, Bank Debt, Loan | December 3rd, 2009 | Add a Comment

Bond Frenzy

Bonds are becoming an important source of capital for shipping companies. Earlier this month, Hyundai Merchant Marine (“HMM”) has successfully issued a KRW 200 billion (USD 169.3 million), 6.7 per cent two year bond. Korea Line has also issued two tranches of 3 year convertible bonds domestically – KRW 50 billion and KRW 40 billion (USD 76 million) respectively. Over in India, Great Eastern Shipping is looking into a Rs 2 billion (USD 43 million) 10 year bond issuance. The bonds will carry a coupon rate of 9.6% and Trust Investment Advisor has been appointed as the arranger.

Written by: carisk | Categories: Asia, Bonds | November 19th, 2009 | Add a Comment

Let Us Get Together

The Korean shipping finance market remains challenging but it is heartening to note one Korean financial institution is thinking out of the box and supporting its core clients. On the second day of Marine Money Asia Week, we had the pleasure to listen to Mr. Dong Hae Lee, Head of Shipping Finance Team at the Korea Development Bank (“KDB”). Mr. Lee told the audience that Korean shipping companies continue to suffer losses from operations which have led to several cases of corporate restructuring and liquidation in the country. But the good news is there are several avenues for Korean owners and operators to strengthen their balance sheets now.

For the big boys, self help is important. Korea Line, Hanjin Shipping, STX Pan Ocean, Hyundai Merchant Marine, SK Shipping and Eukor Car Carriers have raised over KRW 2.93 trillion (USD 2.5 billion) from the domestic capital markets. And if the shipping company has secured Contracts of Affreightment (“COA”) earnings from the big freighters such as POSCO, KOGAS and KEPCO, asset-backed securitization and asset-backed loans can be arranged by the banks to enhance the operator’s liquidity position. In terms of sale and leaseback structures, both KDB and Korea Asset Management Corp (“KAMCO”) have introduced shipping funds to provide further financial support to the shipping industry. Continue Reading

Written by: carisk | Categories: Asia, Bank Debt | October 8th, 2009 | Add a Comment

Clarification

Last week, we had the privilege to discuss with KAMCO about its shipping funds and here is an update for our readers.

To recap quickly, the KAMCO fund structure resembles the Korean Ship Investment Company scheme that is incidentally modeled after Germany’s KG fund and Norway’s KS fund. Firstly, a ship investment company (“SIC”) is established with equity financing from KAMCO funds, pension funds, insurance companies, investment companies and individuals looking for tax benefits. Depending on each shipping fund, KAMCO’s own restructuring fund along with other investors (if any) will provide 40% junior loans to the SIC set up to own the vessel. Financial investors including Hana Bank and Korea Exchange Bank will provide senior loans of up to 20% of the ship’s market value to the SPC.

With the funds from the SIC and financial investors, the SPC will next execute a sale and bareboat charterback with the shipping company, in most cases BBCHP (Bareboat Charter Hire Purchase) for a minimum of 5 years. The BBCHP model allows rates to be set so that owners can continue to operate ships reasonably in the current environment. Typically, only interest payments are to be made over the life of the loans with a balloon payment at the end. The investors will be exposed to minimal residual and equity risks under the BBCHP structure as the shipping company will be obligated to purchase the vessel at the end of the charter. KAMCO can accommodate bareboat charters in the structure as well, depending on the preference of the shipping company. Continue Reading

Written by: carisk | Categories: Asia, Bank Debt | September 10th, 2009 | Add a Comment

Step Aside Fendi, Watch Out Gucci – Big John Brands

John Fredriksen has evolved into his own brand. What the tanker tycoon seems to have learned is that by taking a minority position in publicly traded shipping companies, he is able to create value when investors assume he is there to bid up the stock before taking the company over. With this week’s purchase of 5% of Jinhui, Big John Brands has a toehold in just about every sector of the shipping business. Since the shipping markets began to run in late 2002, Big John Brands has taken minority stakes in HMM, P&O Nedlloyd, NOL, Hanjin, Korea Line, General Maritime and probably a bunch more that we are forgetting.

At the same time, Fredriksen is reducing his stake in Frontline and affiliates. For example, this week Frontline decide to spin off almost half of Frontline’s remaining holding in Ship Finance Int. Ltd. The stake, equal to 25% of the total shares in Ship Finance, will represent a total dividend of approximately USD 400 million. Frontline shareholders will receive 1 share in Ship Finance for every 4 shares they have in Frontline Ltd. Ex date for the dividend is set to 3 February, record date 7 February while the shares will be distributed 18 February.

Fredriksen, who is also Frontline’s Chairman, said in a comment: “In line with our strategy we are pleased to announce that Frontline spins off further 25% of Ship Finance. The spin-off will hopefully lead to an increased liquidity, more independence, better coverage, higher interest and, hopefully, improved pricing of the Ship Finance shares. The difference in business strategy and dividend strategy makes the spin-off logical.”

John Fredriksen has evolved into his own brand. What the tanker tycoon seems to have learned is that by taking a minority position in publicly traded shipping companies, he is able to create value when investors assume he is there to bid up the stock before taking the company over. With this week’s purchase of 5% of Jinhui, Big John Brands has a toehold in just about every sector of the shipping business. Since the shipping markets began to run in late 2002, Big John Brands has taken minority stakes in HMM, P&O Nedlloyd, NOL, Hanjin, Korea Line, General Maritime and probably a bunch more that we are forgetting.

At the same time, Fredriksen is reducing his stake in Frontline and affiliates. For example, this week Frontline decide to spin off almost half of Frontline’s remaining holding in Ship Finance Int. Ltd. The stake, equal to 25% of the total shares in Ship Finance, will represent a total dividend of approximately USD 400 million. Frontline shareholders will receive 1 share in Ship Finance for every 4 shares they have in Frontline Ltd. Ex date for the dividend is set to 3 February, record date 7 February while the shares will be distributed 18 February.

Fredriksen, who is also Frontline’s Chairman, said in a comment: “In line with our strategy we are pleased to announce that Frontline spins off further 25% of Ship Finance. The spin-off will hopefully lead to an increased liquidity, more independence, better coverage, higher interest and, hopefully, improved pricing of the Ship Finance shares. The difference in business strategy and dividend strategy makes the spin-off logical.”

Written by: carisk | Categories: Equity, Freshly Minted | February 10th, 2005 | Add a Comment

Hyundai Merchant Marine Raises $2.4 billion

By Matthew Flynn

The restructuring of Hyundai Merchant Marine may have been the ultimate banker’s Odyssey.

Level a mountain of debt, uproot and replant the car carrier division, tender the container terminals to the giants of the port industry, and disentangle the company from shareholdings with other struggling affiliates. For good measure, sell the roof over the company’s head with the disposal of its headquarter’s building, then do a handful of asset-backed security issues on LNG freight receivables.

At the same time, avoid the sniping from politicians determined to find proof the company illegally transferred funds to North Korea. This history of the company’s involvement with the Hyundai Group’s campaign in North Korea is hard to ignore because it appears to be both the undoing of HMM’s financial security and the source of its current regulatory problems.

Against this backdrop, HMM and their advisors, Credit Suisse First Boston, pulled off one of the most substantial and successful shipping restructuring perhaps in several decades.

Written by: carisk | Categories: Marine Money | April 1st, 2003 | Add a Comment