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Banking Crisis? Not an Issue for BW Group or NOL
2012 is broadly expected to be challenging for both shipping lenders and borrowers. As long as the Euro debt crisis persists and continues to worsen, capital will become increasing scarce. Even shipping companies at the top of the pyramid are busy strengthening their balance sheets and making sure that they have adequate funds to meet capital expenditure requirements in the coming years.
One of the world’s leading maritime companies BW Group has successfully completed a USD 1.5 billion seven-year revolver in mid-November. According to market sources, the proceeds will be used for refinancing and the participants are largely from the previous revolving facility. Pricing is said to be “slightly higher” than the previous revolving facility, although it remains highly competitive in today’s tight market conditions. Continue Reading
Working for the Government – Eksportfinans Unwinds
Heresy! Despite adherents’ strong belief in capitalism, it was the private solution that failed this time. Eksportfinans ASA, the operator of Norway’s 108-scheme (subsidized fixed interest CIRR loans), was caught by the EU’s Capital Requirement Directive that limits large exposures. In order to comply with the requirements, the company needed to be re-capitalized or required a permanent exemption from that rule. Unfortunately, Eksportfinans and its largest shareholders, DNB Bank (40.0%), Nordea Bank (23.21%), the Kingdom of Norway (15.0%), and Danske Bank (8.09%) could not come to terms on a plan for re-capitalization that would ensure adequate export financing and the government deemed a waiver unlikely.
As a consequence, the government took over the 108-agreement lending scheme, which represents 70% of the loan book, from Eksportfinans, which it intends to replace with a state-funded scheme for export credit financing which will be administered by a government agency. Initially, the government intends to establish an interim financing scheme, managed on behalf of the government by Eksportfinans, with an initial funding of NOK 30 billion, until the permanent scheme is operational, which is expected to be no later than July 1, 2012. During this period, new commitments for CIRR loans will be granted by Eksportfinans, as administrator, with the assets and commitments to be taken over by the newly established agency.
Politicians Can’t Agree on Debt? Neither Can Economists
The global economy is seriously ill, and time is running out for politicians and economists to come up with solutions to solve the problems in the West. In July, the New York Times ran an article discussing the wide ranging disagreements among economists despite decades of intensive research. In short, economists broadly agree that government borrowings must be kept in check, but they cannot reach a consensus over the proper mix of tax increases and spending cuts. The key point of contention lies in whether the government should pay any part of its debts by raising revenue, or solely by spending less during troubled times. Tax increases help reduce budget deficits but have undesirable powerful negative effect on investment and disposable income, resulting in slower economic growth.
The lack of definitive answers simply reflect that economics cannot be as precise a science as physics, and economists will continue to bicker over any solution to the deepening sovereign debt crisis. Andy Mukherjee, a financial columnist in a recent article published in the Straits Times, describes the different camps among economists plainly as either those with Paul Krugman and a few like-minded economists of deep Keynesian persuasion (i.e. the view that countries should focus on stimulating the real economy, and not be overly obsessed with debt reduction), or their enemy. There is no middle ground. Keynesian or not, we were very privileged over the past few weeks to listen to a number of reputable economists here in Singapore and we thank our friends at the Norwegian Business Association, Nordea Bank and RS Platou for the opportunity. To begin with, is the world in a global debt crisis? The economists do not have a consensus. Continue Reading
Meeting an Immediate Need, While Looking to the Future- Scorpio Borrows and Files Shelf
In order to partially finance the recently acquired two LR1 Product tankers of 51,000 DWT built in Korea which deliver this month, Scorpio Tankers Inc. yesterday announced that they had arranged a new credit facility with Nordea Bank, DnB NOR and ABN AMRO to finance 50% of the $70 million purchase price of the vessels. The new facility provides availability of up to $150 million for a year.
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
It’s Cold Outside, But the Money Is Hot – A Walk Around Another Financial Center
It is a very short walk between Aker Brygge, Haakon VII’s Gate and Dronning Mauds Gate. Yet the compactness of the area should not dissuade you of the importance of this area. With one noticeable exception, Nordea Bank, it is the center of ship finance in Norway and Nordea has solved the problem of being an outsider by establishing unofficial satellite offices in the Theatercafeen and Dagligstuen depending on the time of day. By definition, Oslo is the center of the Norwegian bond market which lately seems to be single handedly financing the offshore business, but just as importantly it is home to two major Western shipping banks, the previously mentioned Nordea Bank and DnB NOR who more often than not lead the syndicated loan league tables, in addition to having leading capital market roles.
Genmar Buys Time – Amends Loan Agreement and Enters Into Bridge Loan
On Tuesday, General Maritime announced it had amended its Credit Agreement dated July 16, 2010 with Nordea Bank and DnB NOR to allow the company an additional year, ending September 30, 2011, in order to raise a minimum of $52.4 million in new equity (the balance needed to achieve 40% of the purchase price), which will be used to partially finance a portion of the purchase price of the last two vessels to be delivered under the Metrostar agreement.
You’re Never Too Old to Try Something New
Looking to diversify its funding sources, J. Lauritzen A/S (“JL”), a Danish shipowner founded in 1884, offered bonds in the Norwegian market for the first time. The offering of NOK 700 million of senior unsecured notes was well received being fully sold in 1 1/2 hours, somewhat aided by a presubscription consortium. According to the company, the issue was placed with a broad range of investors. Not surprisingly, the purchasers, from a geographic perspective, were mainly from Norway and Denmark, reflecting the fact that the issuer is a private company and not well known outside the Nordic countries. As expected, the issue was largely bought by institutions although there was retail interest too.
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Full House in Athens – Part 2
By Kevin Oates
…in the longer term shipping should correct but quality, transparency and financial strength are key to survival.
Despite the tough market and the general lack of ship finance, Marine Money’s Greek Ship Finance Forum again filled the seats in Athens. With 310 delegates and speakers and some 40 more for the TEN Ltd lunch, there was plenty gossip and exchange of views at the 11th Annual conference held on the 8th of October 2009.
The event had started with a speaker’s dinner the previous night co-hosted by Navios Maritime Holdings and was to end in the early hours of the following morning at the Capital Party co-hosted by Capital Product Partners LP at a well-known Athens nightclub. Even if the market is tough, we still know how to enjoy ourselves.
Back at the conference, our day began with Guy Verberne, a leading economist at Fortis Bank (Nederland) telling us that the economic recovery has come and it may well be sustainable. China, he says, has plenty foreign reserves to prolong it’s stimulus package for as long as it needs and he sees no meaningful cutbacks from the stimulus packages of western governments, at least through 2010. A risk is a double dip in 2011 if we get too bogged down in debt.
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Complications Unwound. How DRYS Got There.
Last week, DryShips announced that it had agreed to acquire, from George Economou and other third party interests, the remaining 25% minority interest in Primelead Shareholders, Inc., the holding company and operating platform for DryShips ultra deepwater drilling rig assets including two owned and operational ultra deepwater semisubmersibles and 4 newbuilding drillship contracts as well as the commercial operating company, Ocean Rig ASA.
The transaction was structured to minimize the cash outlay and leverage with the price being dilution. Consideration for the transaction included $50 million in cash and the issuance of $280 million in face value of mandatorily convertible preferred stock, based upon a price per share of $5.36, the weighted average seven day trailing price. At the offering price, this equates to 52.2 million shares. The shares are manditorily convertible in four equal installments at $6.83 per share (a 27.5% premium) upon delivery of each of the four newbuilding drillships.
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