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Greenfield Financing – IDB Syndicated Loan to Embraport
Last week, the Inter-American Development Bank (“IDB”) joined by commercial banks, WestLB, HSBC, Caixa Geral and Santander, closed a $430 million two tranche syndicated A/B loan to finance the construction, operation and maintenance of Empresa Brasileira de Terminais Portuários S.A. (“Embraport”), a new private mixed-use container and liquids terminal in Brazil’s Santos Port, the largest port complex in the region. Upon completion, this facility will be the largest private port in Brazil.
Banking Crisis? Not an Issue for BW Group or NOL
2012 is broadly expected to be challenging for both shipping lenders and borrowers. As long as the Euro debt crisis persists and continues to worsen, capital will become increasing scarce. Even shipping companies at the top of the pyramid are busy strengthening their balance sheets and making sure that they have adequate funds to meet capital expenditure requirements in the coming years.
One of the world’s leading maritime companies BW Group has successfully completed a USD 1.5 billion seven-year revolver in mid-November. According to market sources, the proceeds will be used for refinancing and the participants are largely from the previous revolving facility. Pricing is said to be “slightly higher” than the previous revolving facility, although it remains highly competitive in today’s tight market conditions. Continue Reading
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
Far East Horizon Unmasks Ship Leasing Ambition
Large public listings are usually accompanied by great fanfare, but one particular company with huge ambition to become a significant capital provider to the shipping industry evaded our radar and concluded its low profile IPO in March. When Far Eastern Horizon (“FEH”), the financial leasing unit owned by the Sinochem Group went on its roadshow for its Hong Kong listing, investors were quick to place enough orders to cover the entire book.
Investors clearly liked FEH’s pedigree parentage. Not only was the controlling shareholder one of the largest state-owned conglomerates in China and a Global Fortune 500 corporation, three other strategic and reputable investors – KKR Future Investments (an affiliate of KKR Asian Fund), Techlink (an affiliate of Government of Singapore Investment Corporation) and TML (an affiliate of CICC Fund) were already significant shareholders in the company prior to the IPO. The three parties had ploughed in USD 160 million in FEH in September 2009 and their investments added weight to the company’s credentials. Six cornerstone investors Sun Hung Kai Properties, Value Partners, Hillhouse Capital, Prime Capital, Owl Greek Asset Management and OZ Management Fund committed a total of USD 250 million to the offering, accounting for 38% of the total deal size. 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.
OGX Discovers the Difference between Success and Failure – 100 bps
Last week, OGX Petroleo e Gas (“OGX”), a company controlled by Eike Batista, successfully issued $2.563 billion of 7-year senior unsecured notes in a 144A private placement. Due to strong investor interest, the deal was upsized from the original amount of $2 billion and priced at par to yield 8.5%. The spread was 611 bps over like term Treasuries reflecting Moody’s B1 credit rating. Proceeds will be used to fund the company’s expected production and development campaign and for general corporate purposes. When the net proceeds are added to cash on hand, there will be sufficient liquidity to cover these expenses until the company can self-fund through its own cash flow. While unsecured the transaction is, in fact, underpinned by potential resources of 10.8 bbls of oil, according to petroleum engineers, DeGoyler and McNaughton. The structure of the transaction is shown below.
Regent Seven Seas 2nd Lien Notes
Last week, Seven Seas Cruises S. DE R.L., the indirect owner of Regent Seven Seas’ three luxury cruise vessels successfully issued $225 million of 9 1/8% senior secured notes due in 2019. Due to strong demand the offering, sold at par, was upsized from $200 million to $225 million and priced at the tight end of price talk. The notes were rated B- and B3 respectively by Moody’s and S&P. The issuer is owned by Prestige Cruise Holdings Inc., a holding company which also owns Oceania Cruises and is itself ultimately controlled by Apollo Management.
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
Funding Opportunities
Last week, Goldenport Holdings Inc. announced a share issue by way of a “placing and open offer” to raise approximately STG 23.5 million or $35 million. The company intends to issue ~18.5 million shares at 127 pence per share, a discount of 1.55% from the prior day’s closing price. In order to demonstrate their commitment as well as to maintain their share position, Captain Paris Dragnis, the founder and CEO of Goldenport, along with certain directors have irrevocably undertaken to acquire approximately 7.5 million shares or approximately 40.7% of the offering. Seeing opportunities based upon the economic recovery and improving shipping fundamentals, the company intends to use the proceeds to fund future acquisitions. Assuming a conservative 50% leverage, the company will have at least $70 million of capacity to go shopping. Jefferies and Panmure Gordon are the joint bookrunners and underwriters with HSBC acting as Sponsor and Financial Adviser. The deal is expected to close on July 20th.
HSBC on China
We had the pleasure of listening to Ms Donna Kwok, a leading Greater China economist from HSBC on “Inflation and the RMB” during Marine Money’s 4th Annual Hong Kong Ship Finance Forum last Friday. One of the salient points Ms Kwok pointed out was her view that the RMB could be fully convertible by 2015-2017 at the earliest. And if that materialises, it could alter the ship financing landscape in Asia.
Shipping has always been a dollar business, but over the past few years, China has been making progressive steps in liberalising its currency. Driven by the shortage of and reluctance to lend in USD, Chinese commercial banks are increasingly receptive to the idea of lending foreign shipping clients in RMB, especially if they have cash flows in RMB. But before shipowners will bite the bait, a couple of conditions will have to be present: shipbuilding contracts need to be
denominated in RMB, and the market has to offer more competitively priced interest rate swap products for owners to hedge their currency risks – and RMB has to be fully convertible in order for that to happen. Continue Reading
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