FSL Gets Refinancing Done in Tough Market

Last Thursday, First Ship Lease Trust (“FSL Trust”) announced that it has Successfully entered into a loan agreement with a syndicate of eight lenders for a six year amortising term loan of USD 479.6 million, secured against its current portfolio of 25 vessels. The new term loan facility will be used to refinance all its maturing bank loans with an outstanding loan balance of USD 483.1 million (refer to Table A). The remaining loan balance of USD 3.5 million will be repaid in cash from FSL Trust’s internal funds.

The new term loan facility is provided by a syndicate of banks led by ABN Amro, Singapore Branch and Overseas-Chinese Banking Corporation (“OCBC”) as mandated lead arrangers and bookrunners. The other mandated lead arrangers are Bank of Tokyo-Mitsubishi UFJ (“BTMU”), UniCredit Bank, Singapore Branch (“UniCredit”), Sumitomo Mitsui Banking Corporation, Singapore Branch, Korea Development Bank, ITF International Transport Finance Suisse (Zurich-based wholly-owned subsidiary of DVB Bank) and KfW IPEX-Bank. Four out of five existing lenders in the maturing revolving credit facilities – BTMU, UniCredit, OCBC and SMBC took positions in the syndication. German bank Helaba is conspicuously missing in the latest line-up, but FSL Trust attracted the strong support from four new lenders (one Asian and three European) in today’s tough credit market.  Continue Reading

JBIC offers NYK loan facility

Export Credit Agency, Japan Bank for International Cooperation (“JBIC”) is leading a syndicated loan for mega carrier Nippon Yusen Kaisha (“NYK”) for the acquisition of a LNG carrier. The vessel will be built by Mitsubishi Heavy Industries and will be placed on a long term charter with Tokyo Electric Power Co (“TEPCO”) upon delivery. JBIC has committed JPY 12.6 billion (“USD 162 million”) to the facility, which we understand is not the entire amount. Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp chipped in as participants in this project finance transaction.

The vessel is rumoured to cost NYK JPY 20 billion (USD 258 million). NYK has a 15 year agreement plus an option to extend for another 5 years with TEPCO for the transportation of natural gas into the country.

NEXI steps up support for Japanese shipbuilders

It has been a busy September for Nippon Export and Investment Insurance (“NEXI”), having participated in two ship export transactions. In the first transaction, a group of lenders, comprising Japan Bank for International Cooperation (“JBIC”), Sumitomo Mitsui Banking Corporation and BNP Paribas Tokyo Branch, have agreed to extend loans of JPY 9.4 billion (USD 122.6 million) to Korea’s Hanjin Shipping for the financing of four Kamsarmax bulk carriers. The ships will be built by Tsuneishi Shipbuilding in Japan. In a typical ECA arrangement for Korean shipowners, JBIC and commercial lenders will disburse the loan through Korea Development Bank and NEXI will underwrite the buyer’s credit insurance for the loans provided by the commercial banks.

In the second transaction, NEXI provided a USD 27.5 million buyer’s credit insurance for a loan to a Singaporean subsidiary of Wallenius Lines AB, a major shipping company in Sweden, for purchase of a pure car & truck carrier (“PCTC”) built by Mitsubishi Heavy Industries. The loans are provided by JBIC and the Bank of Tokyo-Mitsubishi UFJ (“BTMU”). PCTCs are designed to carry a spectrum of vehicles including automobiles, trucks, buses, and tall construction/heavy machinery. And just on Wednesday, NEXI participated in a loan provided to Mundra Port & Special Economic Zone limited, Indian subsidiary of Adani Enterprises for the purchase of a tugboat built by Kanagawa Dockyard. JBIC and BTMU were the participating lenders. Continue Reading

Asian Liners Get Their Game On

Soaring bunker prices have motivated container liners to re-examine their strategy with a renewed focus on operating efficiency, cost reduction and high fleet utilisation. When market leader Maersk Lines announced its plans to pay USD 1.9 billion for 10 new generation 18,000 TEU vessels, it totally changed the rules of the game and has to some extent prompted other major carriers to look into ordering larger and fuel efficient vessels. Today, there appears to be some form of consensus among liner companies that they would need big ships that are over 10,000 TEUs to ply the Asia Europe trade by 2015 and possibly the Trans-pacific trade by 2020 to stay in the game. At the same time, some liner companies have also expressed their intention to build and own vessels to replace chartered-in vessels, so as to maximise their ability to manage excess capacity. During the shipping downturn, liner companies have realised that the decision to layup or sell vessels becomes much easier if they own the ships themselves.

At Marine Money’s conference in March, Kenneth Cambie, Executive Director and CFO of Orient Overseas International (“OOIL”), told delegates that he believes that container shipping is entering a watershed and it will be clear over the next six to nine months who is in the game and who isn’t. He reckoned that those players with the access to capital will be ordering larger ships and preparing themselves for 2015. The spate of newbuilding orders and the seeming lack of capacity discipline among liner companies have sparked market concerns, but while we leave the arguments and controversies to the industry experts, we agree with Mr. Cambie that the access to capital has become increasingly important to survival and in this aspect, Asian liner companies have the competitive advantage.  Continue Reading

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.

ECAs Continue to Take the Centre Stage

In a market where the availability of commercial debt remains rationed, Export Credit Agencies (“ECAs”) supported financings continue to be an important funding source in many major shipping transactions.

Last month, the Japan Bank for International Cooperation (“JBIC”) concluded two loans agreements with K Line Offshore for the financing of one anchor handling tug supply (“AHTS”) vessel and one large platform supply vessel (“PSV”). Established in October 2007 to expand the group’s upstream energy resource development-related business, K Line Offshore is 95% owned by Japanese mega carrier Kawasaki Kisen Kaisha. Continue Reading

Japanese Regional Banks: Potential Sources of Liquidity?

In Japan, the three mega banks – Mizuho Financial Group, Sumitomo Mitsui Banking Corporation and Mitsubishi UFJ may be the market leaders in the country, but there is some anecdotal evidence that regional Japanese banks are now showing greater interest in ship finance. Regional banks particularly in the Shikoku and Setouchi areas remain as an important source of funding for the domestic shipowners and many of them have established dedicated ship finance departments to deliver better service to their shipping clients in recent years.

According to a series of articles published by Marine Net, although some of these traditional lenders have reportedly reached their lending limits allocated to the shipping industry, they are now exploring the possibility of working together with other regional banks that are unfamiliar to the industry on syndicated transactions, to
circumvent the problem of the lack of liquidity. Others are taking the opportunity to increase their exposure to ship finance. 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 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