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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Reverting to the Mean?

Last week, Dealogic published its Bookrunner and MLA Tables for Syndicated Marine Finance Loans for the first half of 2011 and while growth is clearly evident, there is a noticeable defining trend. The offshore services sector, given its strength and capital requirements, is taking on a far more meaningful role.

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MISC’s Unit Clinches USD 137 million

Malaysia Vietnam Offshore Terminal (“MVOT”), a 51% jointly controlled entity of MISC, signed a USD 137 million limited recourse term loan facility from a syndicate of banks comprising Sumitomo Mitsui Banking Corporation, HSBC, Natixis and OCBC Bank (Labuan). PetroVietnam Technical Services Corporation (“PTSC”), a member of the Vietnam National Oil and Gas Group (“PetroVietnam”) owns the remaining 49% in MVOT.

The floating storage and offloading unit (“FSO”) owner will be making use of the seven year loan to finance project costs. Both MISC and PTSC will provide guarantees to the loan in proportion to their shareholding interests in MVOT via a pledge of the shares held by both companies.

JBIC Finances Venezuela

The Japan Bank for International Cooperation (“JBIC”) is certainly not resting on its laurels as it continues to offer foreign shipowners export finance for their ship orders in Japan. It was just two months ago when JBIC provided K-Line Offshore two separate loans worth USD 170 million for the financing of two offshore support vessels, and this time it has concluded a JPY 19.6 billion (USD 238 million) loan agreement with Panavenflot Corp. Panavenflot is the Panamanian subsidiary of PDV Marina S.A., which is owned by Venezuela’s state-run oil corporation Petroleos de Venezuela, SA. JBIC together with Sumitomo Mitsui Banking Corp will jointly provide Panavenflot the export credit facility to finance the construction of four 104,300-dwt Aframax tankers to be built by Japan’s Sumitomo Heavy Industries Marine & Engineering. Trading house Itochu Corp acted as the intermediary between the yard and the Venezuelan owner.

Who Wants to Call the Turn?

We might. While the data may be considered slim and possibly distorted by the $6.75 billion A.P Moller-Maersk transaction, the nine-month 2010 Dealogic shipping data intimates a reversal in the downward trend in syndicated lending which began in 2007. Not only were the number of syndicated deals, volume and new money higher, club deal volume and numbers were down. The latter of course might just reflect deal size, where five of the top fifteen deals were in excess of $1 billion, but we will give the data the benefit of the doubt. In terms of specifics, the number and volume of deals for the 9-months of 2010 was 110 deals totaling $28.4 billion versus the one year earlier total of 90 deals totaling $25.9 billion. The best way to see the trend over time is to look at the data, which we show pictorially below. And, yes, you needn’t remind us that one point does not make a trend.

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In Some Respects, a Return to Normalcy

This week Dealogic published its first half 2010 Bookrunner and MLA Tables for Syndicated Shipping Loans and the news was still dismal but in some respects hopeful. In terms of the big picture, while dollar volumes continued their downward trend, the number of deals in the first half actually increased slightly indicative of, perhaps, less capacity or more focused lending. While the number of club deals increased slightly, from 19 to 23, the deal value declined in proportion to total volume intimating at the revival of the larger syndications. And finally, approximately 90% of the dollar volume was new business rather than refinancings, which is indicative of an improving credit market.  Illustrative data are shown graphically herein.

But, for our readers, it is truly the standings that matter as they represent a scorecard of their performance for the first half of the year. While there was shifting in the standings compared to a year ago, the bookrunner table remained relatively stable. Mitsubishi UFJ displaced its fellow Japanese bank, SMBC for the pole position, while DnB NOR moved into second pushing Nordea into the 4th spot. Outsiders from a year ago, Credit Agricole CIB and ABN AMRO found spots in the top ten this time around. In terms of number of deals, DnB and Mizuho had a substantial lead recording 9 and 8 deals respectively far outpacing the remaining bookrunners. Finally, market share is clearly more concentrated at the top compared to the comparable period last year.
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JBIC and NEXI Ramp Up Support for Shipping

More foreign owners are turning to government supported export credit agency (“ECA”) financing as an important alternative source of finance in bridging the liquidity gap. The benefits are straightforward. ECA financing provides credit enhancement to lenders, improves their appetite and offers longer tenure and cheaper pricing than wholly commercial sources of funding, but it remains uncertain how long this financing avenue will remain open for shipowners. As for now, the momentum appears to be gaining pace.

This week, Société Générale Corporate & Investment Banking (“SocGen”) and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”) announced that they have jointly provided Danish shipowner J. Lauritzen A/S a JPY 15.53 billion (USD 166.2 million) 12 year senior secured facility for the export of five handysize bulk carriers and one capesize bulk carrier. The vessels will be constructed at Imabari Shipbuilding, Hakodate Dock and other Japanese shipyards. The most interesting feature in this transaction would be the participation of Nippon Export and Investment Insurance (“NEXI”), one of the two Japanese export credit agencies. NEXI will provide buyer’s credit insurance coverage on 97.5% of political risks and 95% of commercial risks for the loan and this is the first time that NEXI has provided export insurance cover for a shipping asset based transaction without the support of Japan Bank of Cooperation (“JBIC”). Continue Reading

The More Things Change; the More They Stay the Same, Relatively Speaking

Last year, we began our discussion of Dealogic’s 1Q 2009 Syndicated Shipping Loans Tables with the following sentence: “A quarter, particularly the first one, does not make a year, but according to the first quarter Dealogic tables, which we received today, the axis of the ship finance world has tipped eastward.”  However, we also should have recalled from our studies of Eastern religions that nothing is permanent and the world is forever changing. In a diminished quarter, in volume terms, the Europeans have come back, but still the number one spot in both the Bookrunner and MLA table has gone to a Japanese bank, Mizuho, followed by perennial leaders DnB NOR and Nordea. Mizuho’s finish is an outstanding accomplishment having moved up from the middle of the pack to pass it’s main local competitors, SMBC and Mitsubishi UFJ. Despite a fair amount of movement in the standings, it is still early in the year and we are not ready to make a call with respect to the earth’s axis. We leave you to peruse the tables and make your own judgments with respect to how the banks finished.
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The World Tilts East

Dealogic issued the full year league tables for 2009 this week and there were few surprises. Volumes were down as one would have expected and there was a certain Asian flavor to the leaders.

Perennial leaders DnB NOR and Nordea were supplanted by Mitsubishi UFJ Financial Group, which took the number one spot in both the Bookrunner and Mandated Lead Arranger tables. This strong showing was based upon their strong relationship with NYK Lines, for whom they were the sole arranger on two deals totaling $2.5 billion and their lead position on the largest deal of the year, AP Moller-Maersk’s $6.5 billion transaction. Don’t cry for the Norwegians. DnB NOR held its own, finishing in 2nd place in both league tables. Their finish was largely determined by transaction size as the number of transactions were comparable. Nordea slipped to 5th in the bookrunner table but finished third behind DnB in the all-important MLA table.
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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