Asian Shipping Bond Volume Falls 46% in 2010

In 2009, bonds came back in financing vogue for the shipping industry, with total volume in Asia reaching a record USD 7.6 billion. But a few questions have since been lingering at the back of our minds: “Will this trend continue in 2010? And have the investors gotten too far ahead of themselves and forgotten about the painful corporate bond defaults in 2000/2001?”

As we compile our list of shipping bonds concluded in 2010, some interesting findings are revealed. Total shipping bond volume in Asia has surprisingly declined at a larger pace than expected, down by close to 46% to USD 4.1 billion last year from USD 7.6 billion the year before. But before we hastily conclude that the access to bond money is fast disappearing, the sharp decline can partly be attributed to a number of market specific reasons. Continue Reading

Written by: rwong | Categories: Asia, Bonds | March 10th, 2011 | Add a Comment

A Rude Wake-up Call

Market hearsays turned into wide-spread panic as news of Korea Line’s bankruptcy filing hit the industry on Tuesday. The South Korea’s second largest bulk carrying line filed for a court receivership after its failure to renegotiate a number of loss-making charter arrangements concluded prior to the financial crisis. Alarm bells were also ringing as far away in the United States where several public listed companies have their ships chartered to the beleaguered company.

Among them, probably the most exposed was New York listed Eagle Bulk Shipping. The company has 13 out of its 48 ships on time charter to Korea Line, lasting between six to ten years. In a statement to the stock exchange, the company described its exposure to Korea Line as modest because the vast majority of the charters were fixed at close to current market rates. “To date, none of our charters with Korea Line have been restructured,” it added. In his latest report, DnB NOR’s analyst Glenn Lodden expects many of these time-charter contracts will be renegotiated and the most expensive might be breached. However, he believes that it is unlikely that Korea Line will be liquidated because the company remains “an important part of South Korean infrastructure (iron ore, coal, LNG imports).” Continue Reading

Written by: rwong | Categories: Asia | January 28th, 2011 | 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

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

Korea Line on Thin Ice

Troubled Korea Line has successfully renegotiated its existing time charter agreement for a 50,326 dwt Supramax with Hellenic Carriers at a reduced time charter rate of USD 35,000 per day. The new rate is close to 38% lower than the previous charter rate. Continue Reading

Written by: carisk | Categories: Asia, Company News | February 26th, 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