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

MISC secures USD 100 Million For Offshore Project

Following the announcement that it has clinched a contract for the lease of 2 mobile offshore production units, MISC’s subsidiary Malaysian Offshore Mobile Production (Labuan) has completed a USD 110 million seven year project financing with mandated lead arrangers ABN AMRO, ANZ, ING Bank, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation. Continue Reading

No Surprises This Quarter Either

On Wednesday, Dealogic released its Bookrunner and MLA Tables for Syndicated Shipping Loans for the 9 months 2009. As expected, total volume and transactions were well down from the prior year. Total deal volume was $25.6 billion in 85 transactions compared to $72.2 billion in 263 transactions over the same period in 2008, confirming what we hear anecdotally. In percentage terms, the nine-month decline was 64.5%, which was less than the quarter over quarter reduction of 73.9% suggesting relief is not yet in sight.

Looking at the changes in the tables from the first half of the year, there was movement in the bookrunner table (figure 1) as Mitsubishi UFJ jumped from 8th place to 1st on the strength of two NYK deals booked at the end of September. This pushed SMBC into 2nd place. In a similar fashion, ING moved from 9th to 3rd on the back of the Bluewater transaction, while BofA Merrill Lynch, which was not even in the top 20 came out of nowhere to finish in 9th place based upon the Tidewater transaction. DnB NOR and Mizuho rounded out the top five finishers. The data is particularly striking in that 9 banks made the top 20 having done only a single transaction.

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Bumi Armada Completes USD 190 Million Fundraising

Armada Oyo has secured a five-year USD 190 million limited recourse loan facility with a club of seven mandated lead arrangers for an FPSO currently undergoing conversion and owned by its parent Bumi Armada Berhad. The loan will finance around 75% of the project cost, and remarkably was oversubscribed by more than the total project amount. Final commitments came through in springtime, with closure just in August.

SMBC acted as structuring bank, documentation bank and SACE coordinator on behalf of the team of mandated lead arrangers, which in addition to SMBC comprised Banca UBAE S.P.a., Australian and New Zealand Banking Group Limited (ANZ), ABN AMRO Bank N.V., WestLB A.G., Malayan Banking Berhad (Maybank), and Standard Chartered Bank. Watson, Farley & Williams advised Bumi Armada on the legal aspects of the transaction. Continue Reading

Tightening the Screws

Last week, Global Ship Lease (“GSL”) announced that they had come to terms with their bankers, Fortis, Citi, HSH Nordbank, DnB NOR and SMBC, with respect to an amendment of their $800 million credit facility. The amendment incorporates the following main terms:

• The LTV covenant is maintained at 75% but is waived through November 30, 2010, meaning the first test will take place on April 30, 2011. Ongoing testing is conditioned upon the availability of valuations.
• Amounts borrowed under the facility will bear interest at LIBOR plus 3.50% through November 2010 and thereafter pricing will be on a grid of 2.50% to 3.50% depending on the LTV.
• The $82 million purchase of the CGM Berlioz will be funded by a $42 million drawdown on the facility, no less than $20 million from cash on hand with the balance of no more than $20 million funded from an over advance loan (“OAP Loan”) under the facility.
• The OAP Loan has repayments scheduled for November 2009 and January 2010 based upon free cash flow in excess of $20 million. In any event, the loan must be repaid in full by June 30, 2010.
• Concurrently, with the Berlioz funding, all undrawn commitments, approximately $200 million, will be cancelled and the facility will convert to a term loan.
• CMA CGM has agreed to defer redemption of its $48 million in preferred shares until after the final maturity of the credit facility in August 2016. Dividends on these shares will be permitted. In addition, CMA CGM will not reduce its holdings of common shares below the current level of 24.4 million until the conclusion of the waiver period, November 2010.
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Watson, Farley & Williams LLP Advises in High Profile KOGAS Project Financing

The Singapore office of Watson, Farley & Williams LLP (“WFW”) advised on the high profile Korea Gas Corporation (“KOGAS”) refinancing for three 1999 built LNG carriers.  The 138,200 cbm built LNG carrier “Hanjin Muscat” is on bareboat charter to Hanjin Shipping Co., Ltd, the 138,100 cbm built LNG carrier “SK Summit” is on bareboat charter to SK Shipping Co., Ltd. and the 135,000 cbm built LNG carrier “Hyundai Technopia” is on bareboat charter to Hyundai Merchant Marine Co., Ltd.  All three LNG carriers are operating under long term contracts of affreightment with KOGAS. Continue Reading