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Hanjin Heavy Industries Mulls Bond Offering
Bond markets in Asia continue to serve as a major source of funding for many shipping and shipbuilding companies. Bonds do not dilute existing equity, mostly sold on an unsecured basis, and more importantly offer longer repayment periods at lower costs compared to bank debt.
This week, Korean shipbuilder Hanjin Heavy Industries & Construction is hoping to sell KRW 120 billion (USD 103.3 million) three year domestic bonds. The bonds are expected to be priced at 6.1%, marginally higher than the company’s KRW 150 billion corporate bonds issued in November 2011. Meritz Securities, Korea Investment & Securities, Woori Investment & Securities, Korea Development Bank, Daewoo Securities, Shinhan Investment Corp and Hyundai Securities are reportedly participants in this offering.
HMM Seals USD 500 million Debt Facility
Hyundai Merchant Marine (“HMM”) has demonstrated that even during times of economic uncertainty, reputable ship owners with good track records are still able to tap the banking market. Last Tuesday, HMM concluded a USD 500 million syndicated debt facility led by DNB Bank. Other participating lenders include ABN AMRO, Credit Agricole, Korea Finance Corporation and Korea Development Bank. The facility will be used by HMM to fund the construction of five mega container vessels being built at Daewoo Shipbuilding & Marine Engineering which are scheduled to be delivered throughout 2014.
DNB says the latest transaction underlines the bank’s continued commitment to shipping throughout the cycle. In an earlier report, J.P. Morgan analyst Sofie Peterzens pointed out that the bank is well positioned to absorb potentially higher shipping losses from a profitability and capital perspective. With only 7.7% of total lending to shipping, a well diversified loan portfolio and LTVs averaging 60-75%, Ms Peterzens believes that DNB’s exposure to the sector is manageable.
FSL Gets Refinancing Done in Tough Market
Last Thursday, First Ship Lease Trust (“FSL Trust”) announced that it has Successfully entered into a loan agreement with a syndicate of eight lenders for a six year amortising term loan of USD 479.6 million, secured against its current portfolio of 25 vessels. The new term loan facility will be used to refinance all its maturing bank loans with an outstanding loan balance of USD 483.1 million (refer to Table A). The remaining loan balance of USD 3.5 million will be repaid in cash from FSL Trust’s internal funds.
The new term loan facility is provided by a syndicate of banks led by ABN Amro, Singapore Branch and Overseas-Chinese Banking Corporation (“OCBC”) as mandated lead arrangers and bookrunners. The other mandated lead arrangers are Bank of Tokyo-Mitsubishi UFJ (“BTMU”), UniCredit Bank, Singapore Branch (“UniCredit”), Sumitomo Mitsui Banking Corporation, Singapore Branch, Korea Development Bank, ITF International Transport Finance Suisse (Zurich-based wholly-owned subsidiary of DVB Bank) and KfW IPEX-Bank. Four out of five existing lenders in the maturing revolving credit facilities – BTMU, UniCredit, OCBC and SMBC took positions in the syndication. German bank Helaba is conspicuously missing in the latest line-up, but FSL Trust attracted the strong support from four new lenders (one Asian and three European) in today’s tough credit market. Continue Reading
NEXI steps up support for Japanese shipbuilders
It has been a busy September for Nippon Export and Investment Insurance (“NEXI”), having participated in two ship export transactions. In the first transaction, a group of lenders, comprising Japan Bank for International Cooperation (“JBIC”), Sumitomo Mitsui Banking Corporation and BNP Paribas Tokyo Branch, have agreed to extend loans of JPY 9.4 billion (USD 122.6 million) to Korea’s Hanjin Shipping for the financing of four Kamsarmax bulk carriers. The ships will be built by Tsuneishi Shipbuilding in Japan. In a typical ECA arrangement for Korean shipowners, JBIC and commercial lenders will disburse the loan through Korea Development Bank and NEXI will underwrite the buyer’s credit insurance for the loans provided by the commercial banks.
In the second transaction, NEXI provided a USD 27.5 million buyer’s credit insurance for a loan to a Singaporean subsidiary of Wallenius Lines AB, a major shipping company in Sweden, for purchase of a pure car & truck carrier (“PCTC”) built by Mitsubishi Heavy Industries. The loans are provided by JBIC and the Bank of Tokyo-Mitsubishi UFJ (“BTMU”). PCTCs are designed to carry a spectrum of vehicles including automobiles, trucks, buses, and tall construction/heavy machinery. And just on Wednesday, NEXI participated in a loan provided to Mundra Port & Special Economic Zone limited, Indian subsidiary of Adani Enterprises for the purchase of a tugboat built by Kanagawa Dockyard. JBIC and BTMU were the participating lenders. Continue Reading
Korean Shipping Companies Still Not Out of the Woods
Samho Shipping has joined the growing list of South Korean shipping companies that have filed for court protection since the outbreak of the shipping crisis in 2008.
In 2010 alone, Samho Shipping suffered a KRW 43.2 billion (USD 40.1 million) operating loss, largely due to depressed freight rates in the chemical tanker sector. The company had tried to improve its liquidity position by offloading two 17,500 dwt bulk carriers, via sale and leaseback arrangements worth USD 41 million under Korea Development Bank’s “Let’s Together Shipping Fund”. But despite the proactive measures, the company’s liquidity problem continued to deteriorate. This was partly due to its financial commitment as a payment guarantor for its associate company Samho Shipbuilding and the hijack of its two vessels M/V Samho Dream and M/V Samho Jewelry by pirates drove the final nail in the company’s coffin. Creditors that have exposure to Samho are said to include Busan Bank, Kyongnam Bank, Nyonghup Bank and Korea Development Bank. Continue Reading
Credit Agricole Asia Participates in “Lets Together Shipping Fund”
Credit Agricole Asia Ship finance Limited, the agent for Credit Agricole Corporate and Investment Bank, as senior lender, and The Korea Development Bank, as junior lender, have provided USD 78 million pre and post delivery financing to two Panamanian single purpose companies established under the Korean “Lets Together Shipping Fund” structure for the acquisition of two 115,000 DWT bulk carriers.
The ships are being constructed at New Times Shipbuilding Co. Ltd. in the People’s Republic of China and, upon delivery, will be bareboat chartered to Hanjin Shipping Co., Ltd. One ship will be subsequently chartered under a consecutive voyage charter to Korea South-East Power Co., Ltd and the other ship will be subsequently chartered under a consecutive voyage charter to Korea Western Power Co., Ltd. Continue Reading
ABN AMRO Finances Another KDB vessel
ABN AMRO Bank, Singapore Branch has recently provided pre-delivery and post-delivery senior debt facilities to a Panamanian single purpose company established under the Korea Development Bank Shipping Fund Program for the acquisition of a capesize class dry bulk carrier.
The carrier was sold to it by STX Pan Ocean and will be bareboat chartered back to the company on delivery and, subsequently, sub-chartered out to a Hong Kong leasing company. The Singapore office of Watson, Farley & Williams advised ABN AMRO Bank the lenders in this transaction.
Seoulful Solutions
Korea’s ship finance scene has witnessed a wave of important new developments of the past months. A recent visit to several key Korean financial institutions yielded some interesting insight into how the ship finance market in that country is rapidly evolving and where future opportunities may be under development.
Korea Development Bank (KDB) is rapidly preparing for its privatization in the next year. 110 experienced staff have been transferred from KDB into “grandparent” company Korea Finance Corporation (KoFC). These include Mr. DongHae Lee, who many may know from his previous role as Team Head of Shipping Finance at KDB where he played a key role in developing the Let’s Together Fund as well as in other transactions such as Marine Money 2009 Bank Debt Deal of the Year winners KOGAS I and KOGAS II. Mr. Lee has taken up as General Manager, Global Finance Department at KoFC. He is joined by Mr. Yongsung Yim, now International Finance Team Head, Global Finance Department at KoFC. Continue Reading
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
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
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