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Syndicated Market Continues on Track
Last Friday, Dealogic released its Bookrunner and MLA Tables for Syndicated Marine Finance Loans for 2011 showing total syndicated loan volume at $68.4 billion up from last year’s $50.1 billion. From the macro perspective the trend remains upward as deal volume and number of transactions grew respectively 26.2% and 19.6% compared to the year earlier. This continues the growth which commenced in 2009. Ignoring the boom in volume in 2007 and 2008, the current volume is on par with the years prior. A further measure of the health of the syndication market is also reflected in the nominal reduction of club deal volume as well as the declining proportion of these deals versus total syndicated volume. This is best seen pictorially in the graphs below.
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.
A Look Back – Some Further Insights on the GE SeaCo Acquisition
When the purchase of GE SeaCo by the HNA Group was announced, details of the transaction were few and difficult to come by. We scoured our contacts and were able to glean some color. We reprise the salient points below with the new details interspersed.
As the fifth largest player in the global marine container leasing industry, GE SeaCo owns and manages over 870,000 20-foot equivalent units, the industry’s standard measure of fleet size. The company was put into play last year as part of GE’s plan to shed financial assets and emphasize its industrial businesses. From its original beginning as Genstar, the container leasing business has never been a great success for GE Capital.
Private Equity Firms Charge into Shipping
A couple of eyebrow raising private equity deals in the shipping space were announced last week, just before the global markets took a beating. HNA Group, a Chinese conglomerate and parent of rapidly expanding shipping company Grand China Logistics has agreed to acquire Singapore based container leasing company GE SeaCo, together with Hong Kong based private equity and advisory firm Bravia Capital, for USD 1 billion.
GE SeaCo’s joint venture partners, GE and SeaCo Ltd, will receive approximately USD 500 million and USD 528 million each for their interests in the joint venture and their respective owned container fleets (net of certain seller transaction costs). And following the completion of the acquisition, GE SeaCo will operate as a core business within HNA’s existing logistics and finance businesses. The acquisition is being funded by a combination of equity and a committed debt facility, arranged through Deutsche Bank and ING. Deutsche Bank Securities served as sole M&A advisor to the sellers in this transaction.
Adam Tan, Executive Director of HNA, pointed out in a press release that the acquisition would fit precisely into the group’s strategic plans to quickly grow its logistics and transport business. HNA currently owns and operates China’s fourth largest port, a fleet of 30 container ships and a container ship finance arm. GE SeaCo began life in 1998 as a 50/50 joint venture between GE Capital and SeaCo Ltd, and has grown to become the fifth largest player in the global marine container leasing industry owning and managing over 870,000 20-foot equivalent units.
And it is not just about Asian private equity firms buying up Western companies. A group of private investors, comprising First Reserve, WL Ross, Fairfax Financial Holdings, Morgan Creek Capital Management, PPM America Capital Partners and sovereign-wealth fund China Investment Corp, have committed to invest over USD 600 million in equity in private shipping company Diamond S Shipping. Diamond will in turn make use of the funds to acquire 30 MR product tankers from privately held Korean shipping company, Cido Tanker. With the acquisition of the 30 tankers, Diamond will quadruple the size of its fleet to 40 ships with an average age of 1.75 years. Incidentally, energy industry-focused firm First Reserve Corp is also Diamond S Shipping’s founding investor.
Mayer Brown JSM acted for Cido on this transaction which has been structured as a sale of shares in various vessel-owning companies while Jones Day advised Diamond S Shipping. The balance of the purchase price will be financed by Nordea Bank Finland and DnB Nor Bank ASA. We note that Cido’s fleet had been up for sale for quite some time. In 2010, DnB NOR sold 5 MR tankers for Cido to Blue Lines, a Dubai based shipping company backed by Middle Eastern funds.
Deutsche Bank Manages Sale of GE SeaCo – World’s Fifth Largest Container Lessor
General Electric Co. and partner SeaCo Ltd agreed Monday to sell their shipping-container-leasing joint venture, GE SeaCo, in a $1.05 billion transaction.
Ending a seven-month-long auction that attracted strategic and financial investors, Deutsche reported they had arranged the sale of GE SeaCo, which ranks as the world’s fifth-largest lessor of marine containers with a portfolio of more than 870,000 TEUs, to a consortium including HNA Group Co. Ltd. of China and Bravia Capital of Hong Kong, a specialist private equity firm and long standing advisor to HNA Group.
Reverting to the Mean?
Last week, Dealogic published its Bookrunner and MLA Tables for Syndicated Marine Finance Loans for the first half of 2011 and while growth is clearly evident, there is a noticeable defining trend. The offshore services sector, given its strength and capital requirements, is taking on a far more meaningful role.
Even Big Boys Get the Blues – A.P Moller-Maersk Bides Time
Market reports suggest that A.P Moller Maersk has postponed a planned EUR 1 billion bond issue due to poor market conditions. Led by Barclays, ING, J.P. Morgan, Mitsubishi and Nordea, the roadshow for the 10-year bond was to have begun on May 31 but never transpired. Analysts attribute the delay to a poor corporate bond market which is struggling with the Greek debt crisis among other issues. Following its desire to diversify its funding sources, Maersk has been a recent and regular visitor to the bond market beginning with its debut in 2009, a 750 million Euro issue. This was quickly followed by a NOK 4 billion issue and last November by a 500 million Euro 7-year issue. No worries here as the markets will certainly right themselves and in the meanwhile we are certain Maersk has sufficient liquidity to meet its needs.
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.
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
And the Winner is….the Syndication Market
Last quarter, we went out on a limb, a pretty sturdy one we must confess, and called a turn in the downward trend in the syndication market, based upon a 9.8% increase in volume. Thankfully, we were correct, but the result was unexpected. According to Dealogic, for the twelve months ending in 2010, total syndicated shipping volume was $50.06 billion, an increase of 53.2% over 2009. The ancillary data provided by Dealogic strongly supports this revival, as well as an improving credit environment. As shown below, new money raised nearly doubled from the prior year but what is more significant is that it represented ~76% of new volume whereas in the prior year it was only 59%. The dollar amount of club deals was virtually unchanged, which had the effect of reducing the percentage of club deals as a portion of total volume from 42% in 2009 to approximately 30% in 2010. These trends can be seen in the enclosed graphs.
The Official Guide To Marine Finance Providers
Shipping Index
