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Deutsche Bank Manages Sale of GE SeaCo – World’s Fifth Largest Container Lessor
General Electric Co. and partner SeaCo Ltd agreed Monday to sell their shipping-container-leasing joint venture, GE SeaCo, in a $1.05 billion transaction.
Ending a seven-month-long auction that attracted strategic and financial investors, Deutsche reported they had arranged the sale of GE SeaCo, which ranks as the world’s fifth-largest lessor of marine containers with a portfolio of more than 870,000 TEUs, to a consortium including HNA Group Co. Ltd. of China and Bravia Capital of Hong Kong, a specialist private equity firm and long standing advisor to HNA Group.
Are the BIG ships a Game Changer? The Liners “Post Manifesto”
By Robert Kunkel
In February of this year, Maersk Line signed a $1.9 billion dollar order for ten 18,000 TEU container ships. Larger than the current 15,550 Emma Maersk class, the new Triple E’s are destined to trade Asia to Europe in a market Maersk claims has a 14% annual growth potential. The ships bring a new standard of energy efficiency to the lane and reportedly change the container game – again. The initial order of ten ships at South Korea’s Daewoo Shipbuilding was backed by options for twenty additional vessels. Maersk claimed they were confident the Triple E’s were the future of box shipping and supported that statement with a decision to spend nearly $5.5 billion dollars. Yet in June, after the release of the controversial “Maersk Manifesto”, they decided to convert only one option and limit the total fleet to twenty. What is more important to note is that no other carrier has announced follow on orders of the same ship size and, in fact, many new building contracts in the larger Post-Panamax sizes are being cancelled.
Big ships were the talk of early 2011 as several industry sectors searched for new economics or answers to old problems: overcapacity, rising fuel costs and a decrease in demand. By chance, does anyone remember ULCCs? On the dry side Vale’s 400,000 deadweight bulk carriers threatened the Capesize market and brought a new cost structure to the iron ore trade with an announcement of 32 Very-Large Ore Carriers (VLOC) to service the Brazil to China route. The ship construction was spread throughout China and Korea, yet delivery schedules quickly became an issue with the new design. Reports surfaced of new blocks being scrapped due to welding and coating deficiencies at Rhongsheng Heavy Industries in China and the scheduled delivery of twelve Vale VLOCs contracted at South Korea’s Daewoo shipbuilding also slipped. The delays prompted discussions of deferred deliveries by the owner’s hand and those rumors continued when the first vessel, The Vale Brazil, loaded 391,000 metric tons of ore for Dalian, China and mid-voyage diverted to Taranto, Italy as permission to berth at Dalian was not received. Some say the decision was influenced by China’s domestic steel industry and others reported technical problems. Vale claimed it was nothing more than a commercial decision to support its European customers and utilize one of the ten ports capable of handling these monsters. Is everyone looking at Europe? Or is everyone concerned about China’s heavy handed commitment to domestic partners? A recent request by China’s ore shippers to the mining giants to “re-visit” their construction issues may point to the real reason. Limited terminal space for inventory and a new logistics focus are now the critical factors in determining how ore or for that matter boxes are delivered to the end user.
The Issues relating to Security over newbuildings
By Goh Mei Lin, Watson, Farley & Williams LLP
Over the last two years or so we have had to deal with numerous issues relating to ships under construction at shipyards in Korea, Japan, India, Vietnam, Indonesia, Malaysia and China. These have included issues relating to newbuildings at shipyards which have become insolvent, shipyards which have not been able to secure refund guarantees, shipyards which have been unable to deliver on time due to liquidity problems or due to the yard facilities being incomplete and newbuild contracts involving buyers which have defaulted in their obligations under the contracts and/or their loan agreements.
Given the difficulties which banks face when seeking to enforce their security over shipbuilding contracts and refund guarantees and the misunderstanding which certain parties have as regards what their rights are as assignee of the borrower’s rights under the shipbuilding contract, a number of banks have reconsidered the practice of providing pre-delivery financing. We have, for example, often had to remind banks that refund guarantees do not secure the obligations of the borrower and therefore banks cannot call on a refund guarantee in order to recover pre-delivery instalments paid where the borrower has defaulted on its loan obligations but the shipyard has no obligation to refund the pre-delivery instalments. Further, in circumstances where the borrower is entitled to cancel the shipbuilding contract and to require a refund but has not exercised its right to do so, the banks will need to consider enforcing its rights in respect of the shipbuilding contract before enforcing its rights in respect of the refund guarantee.
Ship Finance in Australia: A Home Game?
By Jacqueline Bell, Norton Rose (Asia) LLP
Three years on from the onslaught of the global financial crisis, Australia is one of the few developed economies to bounce back with a comparatively clean bill of health. The country boasts a wealth of financing opportunity in the commodities and energy sectors, and yet the ship finance market remains effectively inaccessible to foreign lenders.
As a nation rich in minerals, Australia is an active exporter to its neighbours in China, Japan, South Korea and India. Capesize bulk vessels loaded with coal, iron ore, gold and alumina plough the busy Australia-Asia route, which is currently ranked as the 12th largest trade route in the world by TEU. Australian heavyweights such as Woodside and BHP Billiton are not the only players in town, as foreign shipping companies have also got in on the act. Australia’s four main ports play host to hulls bearing the names of Maersk Line, MSC and CMA CGM which comprise roughly one third of Australia’s container shipping.
Pockets of Mezz in Korea
By Kevin Oates
Interestingly, there appears to be some finance available from Korean institutions, mostly for domestic owners (is it different anywhere else these days) but in smaller amounts, and for structured transactions, as well as for international shipping companies which “fit the bill.”
Of course, the need for finance from domestic owners is enormous. Estimates from the Korean Shipowners Association are that Korean owners have about 150 ships to be delivered between now and end 2013, with an investment value of some $10 billion. As in other countries, the larger, well capitalized companies can attract finance from the likes of KEXIM, Korea Development Bank and foreign lenders like DVB Bank, Nord LB, BNP Paribas and others. Typical leverage might be up to 60 – 70%, although higher than this is possible with long-term charters and parent guarantees. Worthy of note is the fact that the top five owners in Korea own 70% of all Korean owned vessels and have the bulk of vessels on order. The second tier of 15 – 20 owners can manage but smaller companies have virtually no access to bank finance. In this latter category, large in number of companies though small in tonnage terms, there may be real pressure. According to one source already 80 shipping companies in Korea have closed down. Additionally Korea Line and four other companies have taken credit protection (effectively Chapter 11).
Shipping in Indonesia: Opportunities and Challenges
By Kohe Hasan, Norton Rose (Asia) LLP
Indonesia is a country with great potential and in particular, is blessed with an abundance of natural resources. It is the world’s largest producer of palm oil and a significant producer and exporter of coal, copper, gold, nickel and oil and natural gas.
Last year, the Indonesian economy grew by 6% and Bank Indonesia estimates the economy to grow by up to 6.5% this year. This positive outlook is largely driven by the recent boom in the commodities sector which has seen Indonesia becoming one of the largest exporters of natural resources to China and India, the two regional powerhouses. It has also witnessed a significant growth in the strength of its domestic market with a population in excess of 240 million and a growing wealthy middle class. This immense potential consumer base is increasingly providing a strong foundation for sustainable economic growth and resilience against the vagaries of the world’s economy as well as being a hedge against an over-dependence on commodities.
Iran Sanctions: Navigating Through Vagueness
By Bruce G. Paulsen, Esq. and Benay L. Josselson, Esq., Seward & Kissel LLP1
The U.S. Government recently took aggressive steps against shipping companies and others doing business with Iran. Those companies were sanctioned for, among other things, facilitating the development of petroleum resources and refined petroleum products by Iran under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA” or the “Act”). CISADA was enacted on July 1, 2010 to add to and amend the Iran Sanctions Act of 1996 (“ISA”). For much of its first year, CISADA went largely unenforced, but that changed on May 24, 2011, when the U.S. Government unleashed a wide array of sanctions on both foreign and U.S. companies, with a specific emphasis on the shipping business.
CISADA is an attempt by the U.S. government to legislate internationally. The White House, preferring to develop its Iranian sanctions regime through the U.N., did not favor Congress acting in the international arena and thus did not favor CISADA when it was debated in Congress. However, CISADA passed both houses of Congress with veto-proof majorities, and the President signed the bill on July 1, 2010. At first, it appeared that the White House had little appetite to enforce the Act, with little enforcement activity in 2010 and none directly affecting the shipping business. Those engaged in Iranian trade, perhaps, developed a sense of security during this period. When the U.S. Government took action this May to enforce CISADA, those who had not prepared were taken by surprise. Iran is a big market for the shipping industry – the temptation to ignore the law and remain in that market is significant. Below we will look at CISADA itself and discuss the risks that go with it.
Offshore Supply Update in Asia
By Andy Yeo, Pareto Securities Asia Pte. Ltd.
Introduction
Sentiment towards modern offshore assets has improved significantly over the last year, supported primarily by attractive oil prices and positive E&P spending growth. This article examines the performance and development of the offshore supply market in Asia over the last year, focusing primarily on Anchor Handling Tugs (“AHTs”), Anchor Handling Tug Supply (“AHTS”) and Platform Supply Vessels (“PSVs”).
Burgeoning Indian shipping sector ripe for change
By Robert Driver and Manik Verma, Norton Rose (Asia) LLP
Introduction
Transportation and infrastructure have, throughout history, been an enduring passion for Indian companies. Today with a population of 1.2 billion and growing, India is in the midst of an economic boom that has already lasted ten years and continues unabated. As far as transportation is concerned, collaborations with foreign investors such as Macquarie Group, 3i Group, Citigroup and Blackstone, and the establishment of infrastructure investment funds has enabled investment in transportation to undergo astonishing development on a nationwide level. Today, numerous capital projects, including Metro rail projects, Mundra ultra mega power plant project and Sasan, Tilaiyya and Krishnapatnam projects are being implemented across the country.
Funding this investment in infrastructure are a number of banks, both domestic and international as the financial landscape in India becomes increasingly competitive. Banks including State Bank of India, IDBI Bank, Axis Bank, ICICI Bank, Deutsche Bank, Standard Chartered Bank and HSBC have all recently concluded deals in the power, shipping and energy sectors in India.
3rd Annual Offshore Rankings – Management Matters
By George Weltman
Background
Tell us the price of oil and we can, generally, gauge the performance of the offshore players. The relationship is not unexpected and the correlation high. Generally speaking, with higher oil prices, the margins are sufficiently rewarding for oil companies to engage in exploration and production (“E&P”) creating demand for drilling equipment and ancillary services.
Perhaps we oversimplify, but the trend shown in figure 1, which illustrates the price of a barrel of WTI over the three-year period since we began the rankings, shows the price of oil rising to record highs in 2008, and then the sharp descent through the first quarter of 2009 with recovery beginning in the next quarter. By June 2009, the oil price had reached $70, a level that is “economic” for the oil companies. From there, an upward trend begins with the price of oil rising to the high $70s until the fourth quarter of 2010, when it breached the $80 level and continued its rise.
The Official Guide To Marine Finance Providers
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