Hanjin Shipping Completes USD 150 million Convertible Issue

Last Wednesday, South Korean carrier Hanjin Shipping raised USD 150 million from the sale of five year convertible bonds. The bonds were launched with a base issue size of USD 150 million, with a USD 50 million upsize option that can be exercised within the first 30 trading days. Sole bookrunner J.P. Morgan did not exercise the upsize option immediately, even though the book was said to be comfortably covered by demand particularly from Europe.

The coupon and conversion premium were also fixed at attractive levels for the investors, at 4% coupon and a 20% premium, suggesting the investor sentiment remains price sensitive. The convertibles were initially marketed with a coupon and yield ranging from 3.5% to 4% and a conversion premium between 20% and 25% premium over the closing price of its shares on July 6. Continue Reading

Ship Finance Syndications Back?

The syndication market is showing signs of thawing, as evidenced by the number of shipping and offshore transactions in the market. In September 2010, a syndicate of international lenders made available a syndicated project loan facility of up to an aggregate of USD 110 million to a joint venture company incorporated in the Marshall Islands, to part finance various project and construction costs in relation to the heavy lift derrick pipe laying barge with 3,000-tonne crane. The syndicate comprised arranger ABN AMRO Bank, Singapore Branch, NIBC Bank in Singapore, Credit Industriel et Commercial, Singapore Branch and Northern Barge.

Built by ASL Marine shipyard in Singapore, the vessel was initially delivered to joint venture company Swiber PJW 3000, an SPC with three shareholders, Maas Capital, Siva Group and Singapore listed offshore services provider Swiber Holdings, each owning one third of the shares. The vessel was subsequently put on a 10 year bareboat charter with Swiber. Watson, Farley & Williams acted as lead and English counsel to the lenders. Continue Reading

Introduction of the Maritime Sector Incentives Scheme

Author: Ben Rose

Introduction

For a number of years Singapore has worked to establish itself as a major international shipping centre and has introduced a number of tax incentive schemes to achieve this goal. In an effort to consolidate and simplify the regime of maritime tax incentives available to maritime industry participants in Singapore (Tax Incentives), the Singapore Government has recently introduced the Maritime Sector Incentive (MSI) Scheme.

Effective from 1 June 2011, the MSI scheme (operating under the auspices of the Singapore Maritime Port Authority (MPA)), offers both local and international entities a more concise and clearer picture of the Tax Incentives.  The MSI Scheme is intended to simplify and enhance the existing regime and further promote Singapore as an international maritime centre, but it remains to be seen whether the amendments made by the MSI Scheme will in fact promote or hinder the expansion of the maritime industry in Singapore. Continue Reading

RCL refinances with DnB NOR

The Singapore subsidiary of Thailand listed Regional Container Lines has secured a USD 85 million loan agreement to satisfy its working capital requirement and refinance all its existing ship financing related indebtedness with the Norwegian lender. The loan quantum is 66% of combined market value of the collateral vessels and the tenor period is six years from drawdown with the repayment of 24 equal quarterly instalments.

National Shipping Company of Saudi Arabia Scores Big with Islamic Finance

Last Wednesday, Saudi British Bank (“SABB”) and National Commercial Bank for Saudi Riyals signed a SAR 822.6 million (USD 219 million) murabaha financing agreement with National Shipping Company of Saudi Arabia (“NSCSA”). The 12 year loan will be used to pay 80% of the cost of construction of two 26,000 dwt general cargo ships and give the company the financial strength to exercise its option for two similar units at Hyundai MIPO Shipyard. In March, the company signed shipbuilding contracts worth USD 400 million for four general cargo ships including the option to build two additional units with the Korean shipbuilder. Each vessel will be equipped with heavy lift cranes and has the ability to carry containers.

The loan is to be repaid in equal quarterly installments and there is a balloon payment of about 30% at the end of the tenure. The ships will be mortgaged to the financing banks as security for the murabaha financing.

During the same week, NSCSA’s 80% owned subsidiary National Chemical Carriers announced that it has signed two murabaha agreements worth SAR 650 million (USD 173 million) in total with Banque Saudi Fransi and Samba Financial Group. The ten year loans will be used to finance four new chemical tankers ordered at SLS Shipbuilding and Daewoo Shipbuilding & Marine Engineering last year.

Murabaha structure is often used by Islamic banks to purchase an asset on behalf of a client and then sell it back with a mark-up/margin on a deferred payment basis. This complies with Islamic laws that prohibit interest but allow profit.

Peter Döhle Seeks Possible USD 1 billion Deal with China Development Bank

At a time when traditional lenders still have a weak appetite for large numbers, shipbuilders are increasingly becoming proactive in assisting their clients with their financing needs through collaborations with either domestic lenders or export credit agencies. Last Tuesday, China Development Bank signed a Cooperation Framework Agreement with Peter Döhle Schiffahrts-KG (“Peter Döhle”) and Yangzijiang Shipbuilding, thus equipping the German shipowner with the resources to order new ships of up to USD 1 billion at the Singapore listed
Chinese shipyard over the next five years. The cooperative framework agreement should  however be viewed in a broader context as it is not binding in nature and does not constitute the definitive terms of any transaction.

In a related announcement, Peter Döhle has entered into a letter of intent with Yangzijiang for the construction of eight 10,000 TEU container vessels. This order came just two weeks after Yangzijiang was awarded a USD 700 million shipbuilding contract for the construction of seven 10,000 TEU containerships and an option to build an additional eighteen identical units from US listed Seaspan Corporation. Peter Döhle was founded in 1956 in Hamburg and has a fleet of over 400 vessels that is primarily made up of container vessels and mini bulk carriers.

J-WesCo Acquires Westwood Shipping

Sumitomo Warehouse’s wholly owned subsidiary J-WesCo is set to acquire the entire stake in US based Westwood Shipping Lines (“Westwood Shipping”) for USD 53 million. Westwood Shipping is currently owned by Weyerhaeuser NR Company, one of the world’s largest pulp and paper companies, and operates a fleet of seven ships in the Japan, Korea, China, and Pacific Northwest gateways with a turnover of USD 246 million in 2010.

Integrated logistics services provider Osaka based Sumitomo Warehouse hopes that the acquisition will help further expand its international operations. Closing of the transaction is scheduled for August 31, 2011.

A First Ever – Safe Bulkers Accesses Japanese ExIm Financing

Safe Bulkers, Inc. had entered into credit agreements with Japanese governmental financial institutions in the amount of USD 122.4 million to finance three Japanese newbuilding Post-Panamax 95,000 dwt bulkers. One of the vessels delivered last year with the other two expected to deliver in 2011 and 2012.

Structured in accordance with OECD approved credit schemes, the financing is repayable over 12 years and has very competitive financing terms. Interest is likely calculated based upon Commercial Interest Reference Rates, which in the case of dollar loans is based upon U.S. Treasuries. The loan agreement was concluded with the Japan Bank for International Cooperation and Citibank Japan Ltd, acting as lead arranger. Insurance for approximately half of the amount was provided by Nippon Export and Investment Insurance, the official ECA of Japan. Continue Reading

One is Not Enough – FSL Goes Back to Torm

Having whetted its appetite two weeks ago, First Ship Lease Trust (“FSL”) announced that it had acquired from a subsidiary of TORM A/S its second LR2 product carrier, purchasing the M/T TORM Marie, a sister ship to the earlier acquired TORM Margrethe, for the same USD 46 million. Both vessels, which have a deadweight capacity of 109,672 DWT, were built in 2006 at Dalian Shipbuilding Industry. As was the case with the first vessel, the TORM Marie will also be bareboat chartered back to TORM for 7 years, but “on slightly better terms” than the Margrethe. In its weekly report, Martin Korsvold of Pareto suggests the rate is ~USD 16,000/day. The bareboat is similarly structured with recourse to TORM, a purchase option at maturity, an EBO at or after five years and three one year extensions. This vessel is also expected to be delivered this month.

The latest acquisition will also be financed with drawdown of USD 23 million from its existing revolving credit facility together with the proceeds of a just concluded fully underwritten private placement, which raised SGD 20 million (USD 16 million) and cash liquidity. Oversea-Chinese Banking Corporation as the underwriter and placement agent was able to complete the private placement and sold 56 million new FSL units at SGD 0.35 a piece. The issue price represented a discount of 6.4% to the volume weighted average price of the units traded on the Singapore Exchange on the day preceding the time the placement agreement was signed.

NOL Raises More Cash – The MTN Way

Neptune Orient Lines (“NOL”) has sold SGD 300 million (USD 243 million) worth of notes under its USD 1.5 billion Euro Medium Term Note Programme. This marks its second note issuance since its maiden SGD 280 million 10 year 4.65% notes in September 2010. The latest offering is SGD 20 million larger in size, but pays investors an annual coupon rate of 4.40% or 25 bps lower than the previous issue for the same 10 year tenure.

The notes are expected to be issued on 22 June 2011 and mature on 22 June 2021. The issuer has the option to redeem the notes, in whole or in part, at any time on or after 22 June 2016. The net proceeds of the notes will be swapped from SGD to USD and used to partially finance the purchase of new containerships in 2011. DBS Bank, Standard Chartered Bank and HSBC are the appointed joint lead managers and bookrunners for the offering. According to DBS, demand for the notes was so robust that the offering was enlarged from its original book size of SGD 200 million to SGD 300 million, after being oversubscribed by more than SGD 700 million. Continue Reading