China Rongsheng Inks Another Massive Credit Facility

On Monday, Hong Kong listed China Rongsheng Heavy Industries Group Holdings signed a strategic collaboration agreement worth RMB 30 billion (USD 4.7 billion) with China Development Bank in the Chinese city of Nanjing. A large chunk of the facility will go towards its offshore engineering division. We note that Rongsheng has signed many similar corporative agreements with numerous Chinese lenders including China Exim, Bank of China, China Everbright Bank, China CITIC Bank and Agricultural Bank of China since August 2010, of at least total of over RMB 129.5 billion (USD 20.2 billion!).

We also have more details on Rongsheng’s recently completed USD 220 million offshore syndicated loan. Sole book runner Credit Agricole took up the biggest slice in the loan of USD 40 million while four lead arrangers Societe Generale, Aozora Asia Pacific Finance, Bank of East Asia and Bank of Tokyo-Mitsubishi UFJ committed USD 30 million each. Cathay United Bank chipped in USD 20 million. Italian bank Banca Monte Dei Paschi di Siena, Taiwanese lenders Chang Hwa Commercial Bank and Hua Nan Commercial Bank, as well as Metropolitan Bank and Trust in Philippines rounded up the syndication and contributed USD 10 million each. The loan offers the lenders a margin of LIBOR plus 130 basis points and is guaranteed by China Exim Bank.

STX Pan Ocean Raises USD 384 million Debt

In today’s credit market, banks are increasingly conservative in their lending and as a result, export credit agencies provide the necessary credit enhancement to turn large deals into a reality. South Korea’s STX Pan Ocean has recently been tremendous successful in tapping the two largest export credit insurers in Asia, K-Sure and Sinosure for the financing of three VLOCs and three capsize bulk carriers.

In the first transaction, Norddeutsche Landesbank Girozentrale (“NordLB”) and Banco Santander S.A. have teamed up with K-Sure to provide a pre and post delivery loan facility of up to USD 247.2 million to part finance the acquisition cost in relation to three 400,000 dwt Very Large Ore Carriers presently being constructed by STX Offshore & Shipbuilding. The vessels will upon delivery be bareboat chartered to STX Pan Ocean and will be subject to certain long term time-charter arrangements with Vale International S.A. Continue Reading

UASC seals USD 140 million facility with Gulf Bank

Even though there have been signs of improvement in the banking market, capital remains short in supply worldwide. But United Arab Shipping Company (“UASC”) has proven that it is not impossible to turn ambitious plans into reality, with the support from regional banks and export credit agencies.

Last Tuesday, UASC announced the signing of a USD 140 million senior term loan facility with Gulf Bank. The company will be drawing down the loan to invest in its growth and network expansion plans, as well as the enhancement of its new vessels with waste heat recovery systems to reduce the carbon footprint of its ships. We note that this is not UASC’s first transaction with Gulf Bank. In February 2010, the container liner had also secured a USD 87 million loan from Kuwait’s second largest commercial bank to partly finance its nine 13,100 TEU vessels ordered at Samsung Heavy Industries in 2008, reportedly worth USD 1.5 billion. Continue Reading

CMA CGM Replicates Hapag-Lloyd Bond Model

Last week, CMA CGM S.A. successfully offered through a private placement, a $909 million equivalent dual tranche senior note issue, which, in many respects, closely resembled structurally last year’s Hapag-Lloyd bond issue led by Deutsche Bank. The offering consisted of a $475 million 8.5% tranche due in 2017 and a EUR 325 million 8.875% tranche due in 2019. Proceeds of the offering will be used to refinance the company’s existing Euro and Dollar denominated bonds and for general corporate purposes. Key terms are shown below in the Guts of the Deal.

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Tapping Export Finance – The Danish Way

Over the past year, Danish owners have been extremely successful in tapping export credit agencies to help finance a part of their orderbooks in Asia. In a transaction that has recently come to light, J. Lauritzen had signed a USD 267 million export credit financing agreement with BNP Paribas last November. The transaction was structured by the French bank, who also managed to rope in two other mandated arrangers, Société Générale and Bank of China.

The ten year facility was also backed by China’s Export Credit & Insurance Corporation (“Sinosure”), which agreed to provide buyer’s credit insurance on 95% of the commercial exposure for the ten year loan. Proceeds will be used to finance the acquisition of five product tankers and two gas carriers that are currently being constructed at Guangzhou Shipyard International and Yangzhou Kejin Shipyard respectively. The Singapore office of Watson, Farley & Williams LLP advised the syndicate of international lenders. Continue Reading

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

Bank of China in Action Again, What’s New

Bank of China has extended a USD 179.55 million buyer’s credit facility to STX Pan Ocean recently in relation to the South Korean shipper’s acquisition of three 17,600 DWT bulkers ordered at Jiangsu New Century Shipyard. Jiangsu New Century Shipyard is one of the largest private shipbuilding groups in China who has built over 100 ships for owners in Denmark, United Kingdom, Germany and Italy. This successful transaction was initiated by Bank of China’s branch in Jiangsu province, upon news of STX Pan Ocean’s difficulty in securing finance for the ships. This year, STX Pan Ocean has earmarked USD 203 million to invest in 6 vessels. Continue Reading

ECA to the Rescue

Undeniably, export credit agencies (“ECAs”) has played an important role in satisfying part of the financing gap needed by the shipping industry. In China, China Exim Bank plays an instrumental role in supporting the maritime industry, having granted shipping/shipbuilding related loans of over RMB 102.5 billion (USD 15 billion) in the domestic currency and USD 7.45 billion in greenback at the end of 2008. In 2009, the policy bank extended a USD 389 million, 12 year secured facility to New York listed Overseas Shipholding Group (“OSG”), in its first ever loan facility to a US company. It would be nearly impossible to secure a 12 year ship finance loan today, let alone this quantum from a single financial institution. Continue Reading

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

Setting Sights on Overseas

Danish shipowner Torm has signed a ten year USD 167.3 million loan facility with a syndicate of banks led by Bank of China and Societe Generale. The funds will be used to cover 60% of the cost of six 53,000 dwt MR product tankers, each ordered at USD 46.5 million a piece from Guangzhou Shipyard International. Out of the USD 167.3 million facility, USD 83.7 million will be unsecured loans and the other USD 83.7 million in the form of buyer’s credit. This is also the very first time in a foreign syndicated loan that China Export & Credit Insurance Corporation (“Sinosure”) will underwrite the country risk in relation to the buyer’s credit. Torm will have to fork out the remaining 40% equity. Continue Reading