Precious Shipping Signs USD 106 million Shipping Loan

Despite the current turmoil in the financial markets, Precious Shipping has secured a USD 85 million pre and post-delivery term loan facility from ING Bank and DnB NOR Bank for the financing of four new 57,000 dwt supramaxes. The facility will provide financing of up to 80% of the total acquisition cost of USD 106.2 million, a high loan to value ratio in today’s market. Precious Shipping has previously acquired the shipbuilding contracts last December from the Oswal Group Global, a Singapore based company owned by embattled Australian industrialist Pankaj Oswal.

The ships are believed to be the last of a series of nine supramaxes ordered at Yangzhou Guoyu Shipbuilding by Maruti Shipping, established by Mr. Oswal in 2007. In March 2010, Maruti Shipping took the market by surprise when it committed USD 320 million to invest in nine supramax newbuildings. Plans to take delivery of the vessels were unexpectedly derailed earlier this year when allegations were made against Mr. Oswal that he had used funds from his 65% owned Burrup Fertilisers to pay for Maruti’s expenses. Oswal’s Burrup was subsequently placed into receivership when it could no longer service outstanding debt of USD 800 million owed to ANZ. Subsequent reports suggested that Maruti Shipping had attempted to seek loans from major international banks to refinance its ship orders in Singapore, but to no avail.   Continue Reading

Sanko Steamship secures post-delivery financing from ING

ING Bank, as commercial lender, and Norwegian export credit agency Eksportfinans ASA, as buyer credit lender, have provided Sanko Steamship a JPY10.98 billion (USD 143.2 million) post delivery financing for the acquisition of three newbuilding platform supply vessels. The platform supply vessels will be constructed at Universal Shipbuilding Corporation in Japan. The Singapore office of Watson, Farley & Williams LLP acted as advisors to the lenders.

FPSO Cidade de Paratay Contracted and Financing Arranged

Last week, a joint venture comprised of SBM Offshore N.V., Queiroz Galvao Oleo e Gas S.A. (“QGOG”), Nippon Yusen Kabushiki Kaisha (“NYK”) and ITOCHU Corporation announced that it, together with QGOG, had entered into 20-year charter and operating agreements with BM-S-11 Consortium, owned 65% by Petrobras SA (Operator), 25% by BG Group, and 10% by Petrogal Brasil Ltda, for the operation of the FPSO Cidade de Paratay on the Lula Nordeste field. This field is located in block BM-S-11 in the Santos basin in the pre-salt area offshore Brazil in water depths of 2,100 meters.

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Like the Energizer Bunny, Sevan Drilling’s IPO Keeps Going and Eventually Succeeds

In early April, Sevan Drilling ASA, a wholly owned subsidiary of Sevan Marine ASA (“Selling Shareholder”),  announced a global offering of its shares of up to NOK 3,270 million (~$595) by way of a combined secondary offering of existing shares by the Selling Shareholder and a primary issuance of new shares. The offering would consist of an institutional offering, a retail offering to Norwegian investors and an employee offering. The share price is to be established through a book building process for the institutional offering. Based upon an expected price range of NOK 16-21 per share, the company expected a primary issue of up to 120 million new shares (~$350) and 64 million secondary shares (up to ~$245 million).

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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 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

Red Alert

Last Monday, Hong Kong listed shipbuilding, tanker operator and oil storage group Titan Petrochemicals Group (“Titan”) has announced the appointment of Goldman Sachs (Asia) and ING Bank (Singapore Branch) to restructure its existing USD 315.4 million bonds due March 2012. This could potentially result in bondholders losing as much as 70% of their investments.

Titan is offering its bondholders USD 199 in principal amount of the new notes it plans to issue, in addition to 3,075 new shares in Titan and USD 12.50 in cash for each USD 1,000 held as the principal amount of the existing notes. Guaranteed on a senior basis, the seven year USD 400 million bonds were previously issued in March 2005 and have an outstanding principal amount of USD 315.4 million. Continue Reading

MISC secures USD 100 Million For Offshore Project

Following the announcement that it has clinched a contract for the lease of 2 mobile offshore production units, MISC’s subsidiary Malaysian Offshore Mobile Production (Labuan) has completed a USD 110 million seven year project financing with mandated lead arrangers ABN AMRO, ANZ, ING Bank, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation. 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

The Week in Review

The week has been relatively quiet from a transaction standpoint, but sentiment by and large is upbeat. The shipping markets as a whole continue to perform above expectations, and the credit and equity markets functioning smoothly, if not lavishly.

For example, Caterpillar Financial Services this week entered into an agreement to increase Aker Philadelphia Shipyard’s credit line by $150 million. Under the agreement, Caterpillar will fund up to $80 million in construction costs for seven consecutive product tankers, valuing the full agreement at $560 million. Interest payments will be required only during the construction period, and Aker may apply the funding to up to three ships simultaneously. The deal takes care of financing for the remainder of the 12 Jones Act tankers under construction at the yard, which are to be sold to Aker American Shipping for bareboat charter to OSG America. Four these tankers have been delivered, three are currently under construction, and the remainder are to be completed by 2011. Continue Reading