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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.
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.
Continue Reading
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
More Normal?
Dealogic released its first half tables on Wednesday and they resembled, at least in terms of names, what we more typically expect, particularly in the case of the bookrunner table. Nevertheless, the newcomers from the 1st quarter did retain positions on the leader board. Total deal value grew to $17.5 billion comprised of 50 deals, versus the year earlier $43.1 billion comprised of 165 deals, continuing an expected trend. However on a quarter over quarter comparison, transaction volume declined a substantial 47.3% this year marking an even more worrisome trend.
The top 20 bookrunner table underwent the most change as it filled out from 8 banks in the first quarter to 17 in the first half. SMBC held on to first position increasing its volume by 71% and its market share to 6.5%. Nordea returned jumping to 2nd place with a 3.5% market share. SBI Capital fell to 3rd place with Mizhuo and DnB NOR rounding out the top 5. DnB Nor’s placement is significant and representative of its size and importance as its lending, oft repeated, is strictly limited to run-off. In addition to Nordea, the usual European suspects are back, including KfW, BNP Paribas, HSBC, Deutsche Bank, Citi, SG CIB and Calyon. RHB Investment Bank of Malyasia and Axis Bank of India were new entrants and added to the already significant Asian representation.
Global Ship Lease Continues to Struggle With LTV
Global Ship Lease (“GSL”) remains in default of the loan to value covenant in its $800 million credit facility with Fortis, Citi, HSH Nordbank, SMBC, KfW, DnB Nor and Bank of Scotland. As of December 31st, there was $542.1 million outstanding under the facility.
Among the many restrictive covenants, the company has breached and sought waivers from the banks for the LTV test, which provides for a maximum leverage of 75%.
Directly impacted by the economic recession, demand for liner services and therefore containerships collapsed last year. Consequently, there has been a dramatic decline in values and de minimis sale and purchase activity. With little activity and therefore no comps, there is hesitancy on the part of brokers to value assets. Hence the value of GSL’s fleet is a question mark. If, in fact the leverage test is exceeded, the company must either provide additional collateral or prepay the loan to cure the default.
Japanese Shipowners in Rough Waters
Not too long ago, Japanese shipowners were able to secure cheap financing at 90% financing or even 100% financing from the Japanese banks so long they have a long-term charter with one of three mega carriers. But this is no longer the case today when Japanese banks continue to grow cautious and tighten their lending capacities towards the domestic shipping industry.
During the bankers’ panel discussion at Marine Money’s 4th Annual Japan Ship Finance Forum, Mr. Yohei Ugari, general manager of the ship finance department at SMBC, shared with the audience that Japanese mega banks are no different from their Western counterparts and are constrained by their capital-adequacy ratios. At the same time, Japanese shipowners are facing their own set of challenges especially in generating stable cash flows due to the significant appreciation of yen over the past few months. Traditionally, shipowners in Japan are highly leveraged and have enjoyed the low interest yen denominated loans. But it is also this preference for yen denominated loans that exposes them to considerable exchange rate risks, arising from the mismatch in currencies between revenue and expenses. Continue Reading
Fun Raising Continues
As economists struggle to reach a consensus on whether the global economy has indeed begun a sustainable recovery or this is simply a slower pace of contraction, investors are just befuddled by the strength and endurance of the present stock market rally. But one thing is for sure, shipping companies are wasting no time in taking advantage of this broad-based improvement in market sentiment.
In Japan, Mitsui O.S.K. Lines (“MOL”) issued two series of secured straight bonds – bonds number 11 and bonds number 12 last week and raised over JPY 50 billion (USD 528 million). The first tranche of five year JPY 30 billion bonds carries an annual coupon of 1.278% while the second ten year JPY 20 billion tranche pays investors 1.999% annually. The funds will be used to repay existing borrowings and for the redemption of commercial paper. Both Rating & Investment Information and Japan Credit Rating Agency have assigned AA- to the bonds, acknowledging that the company’s well diversified earnings have a strong capacity to recover in a market turnaround. The bonds, although unsecured, come with a negative pledge. At the same time, the company is said to be in the market for a three year JPY 15 billion (USD 156 million) loan with SMBC as the sole bookrunner. The loan is priced at 30 bp over 6-month TIBOR (Tokyo Interbank Offered Rate). MOL expects some signs of recovery in summer this year and is implementing its JPY 40 billion group-wide cost reduction measures to secure stable long term profits. The ability to secure incredibly low cost funding and execute rapid fleet reduction will prove to be critical for the company emerge stronger in face of the crisis. Continue Reading
Bottoming Out?
Over the past week, we have experienced the first market rally from a recession trough. Asian stock markets rallied to some of their highest since mid October as investors take confidence in China’s economic recovery. The manufacturing purchasing managers’ index in China rose from 44.8 in March to 51.1 in April, passing the 50-point mark that separates contraction and expansion for the first time in 9 months.
In a market report published last Friday, JP Morgan presented an optimistic view, suggesting that “we are indeed very close to the bottom in global economic activity, and may already be there, with the world economy set to start expanding again in coming months” but acknowledged that there are still many inherent risks since banks and households are still in balance sheet repair mode and a swine flu pandemic cannot be ruled out. Continue Reading
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