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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
A Perfect Storm
As the BDI dropped below 1,000 for the first time in 6 years on Tuesday, the shares of Britannia Bulk also collapsed with the news of both operational and financial difficulties. Caught in the unexpected downdraft of a market collapse at warp speed, Britannia’s flexible chartering-in strategy could not be unwound in time creating huge losses. As of June 30th, the number of chartered-in vessels was 59 and, according to the news release, the company increased its chartered-in capacity during the 3rd quarter. It was during this same period that demand for dry bulk capacity decreased significantly with a commensurate decline in charter rates. Consequently, the rates achieved during the quarter were far less than those paid to secure the vessels, creating a negative spread. As worrisome as the chartered-in position is, this was a non-controllable event.
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“Green Financing” – Resolution Shipping
Last week, Fortis Merchant Bank announced that it had successfully arranged and structured a EUR 250 million club deal for Resolution Shipping Ltd. A subsidiary of Vroon Group BV, Resolution, a Cyprus company, operates a windmill installation vessel, which is currently on time charter to Centrica installing wind turbines in the North Sea. The facility finances the existing vessel as well as two newbuildings, which are currently under construction and includes pre- and post delivery finance.
The Kiran Holding $440 million syndicated loan Celebrated along Bosphorus
While shipping bankers in Norway at Marine Money’s Oslo event were expressing concern that bank funds should not automatically be counted upon in the current environment, Kiran Holding held a Gala Dinner celebration in Istanbul on Tuesday, 27 May 2008. Some 70 people attended. Guests enjoyed a cruise along the Bosphorus up to the trendy waterfront A’jia Restaurant on the Asia side, where banking support of shipping was very much in evidence. As we reported in FM last week, Kiran Holding signed one of the biggest syndicated loan deals in the history of the Turkish maritime sector, securing a $440 million facility with a most impressive syndicate of banks including: Bank of Tokyo-Mitsubishi UFJ, Calyon, Emirates Bank, HSBC, ING, Lloyds TSB, MashreqBank, Royal Bank of Scotland, Deutsche Shiffsbank Dekabank Deutsche Girozentrale, and Fortis Bank. Eurofin also acted as advisor to Kiran Holding.
According to Kiran Holding Vice President Tamer Kıran, the loan will be used to re-finance the Kiran Asya, a 2005 built 66,000-dwt vessel, and the 29,000-dwt Zeynep Kiran, which was built in 2001. The remainder of the loan will be used to cover the expenses of six newbuildings the Group has ordered from shipyards in China. The loan also provides $100 million in performance guarantees.
Commenting to the gathering of bankers and friends, Kiran Holding Vice President Mr. Tamer Kiran, “I would like to thank [our banks], which have all trusted both in us and our project and participated in this magnificent deal. A deal which proves that even under the current difficult credit conditions of the industry, good projects of good companies can still be financed by committed shipping banks.”
Mr. Lambros Varnavides, Managing Director, The Royal Bank of Scotland Plc, who could have been speaking for all the banks, stated, ” Kiran Holdings is set to be one of the biggest Turkish shipping powerhouses”
Marine Money notes with fondness the age-old story of the company’s origins, a story that can be seen in the best shipping companies all over the world, and that even at a moment of corporate achievement need not be forgotten.
Turgut Kiran, Honorary Chairman, told the audience, “My father was a much loved and highly esteemed mariner. Having lost him at a young age, I grew up listening to stories about him. Perhaps, this is why I was drawn to the marine world. Our children have learned the business well. We started in 1959 with 2-3 people and today we have 1,500 employed”
The theme is important to shipping worldwide as it evolves for the future. Mr. Kiran added, “Kiran Holding has always been committed to modern corporate values; with its strong determination of moving forward and achieving the best at all times and under all circumstances. Our foremost purpose is to create a more institutional, professional and higher level grounds for future generations as one of the leading brands in the Turkish marine sector.”
In Debt
While the equity markets appear to have returned to life, the debt markets continue to face harder times. Significant increases in bank funding costs are translating into significant spread increases for customers, though the drops in base interest rates mean that all this still does not necessarily mean higher all-in borrowing costs. More important than rate increases have been rising bank standards, which have forced less established companies without existing banking relationships to look harder for capital.
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
Surveying the Credit Markets
Marine Money has concluded the collection of data for its 2008 shipping banker survey and would like to sincerely thank all who have participated. We are currently concluding work on our annual shipping portfolio league table and would like to thank the following banks for their cooperation and contribution to the development of a transparent and well-informed ship finance industry: Bank of Ireland, Bank of Scotland, Bremer Landesbank, Calyon, Commerzbank, Danish Ship Finance, Danske Bank, Deutsche Bank, Deutsche Schiffsbank, DnB NOR, Dresdner Bank, DVB, Helaba, HSH Nordbank, HVB, JP Morgan, KfW, Lloyds TSB, Natixis, Nordea and RBS. If you don’t see your bank’s name on the list, think it belongs there, and haven’t been in touch with us this weekend, please send an email to nhuvane@marinemoney.com ASAP to ensure you are included. Both survey and portfolio data will be released in the upcoming May issue of Marine Money.
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