UACC Goes for KS Financing

Not to be confused with UASC, Dubai based United Arab Chemical Carriers (“UACC”) has completed the acquisition of two long-range products tankers. The 73,000 dwt mv “Summit Australia”, now renamed mv “UACC Falcon”, and mv “Summit Asia”, now mv “UACC Eagle”, were bought for USD 43.4 million each. They are now directly owned by two KS (limited partnership) companies in Norway set up by Ness, Risan & Partners and chartered back to UACC on seven-year bareboat charters at USD 13,000, with purchase options attached at the end of the charters. Both vessels were built by China’s New Century Shipbuilding in 2009. Watson, Farley & Williams LLP advised UACC on its acquisition and sale and leaseback of the two newbuild vessels.

Established in 2007, Dubai based UACC currently operates a fleet of 10 chemical tankers – 6 MR ships and 4 LR1 ships. UACC is a major shareholder in the company.

An Interesting Combination

Club deals involving multiple financial institutions from the Middle East, Asia and Europe are not common, but United Arab Shipping Company (“UASC”) has demonstrated that raising capital across these regions can still be done today, if you know where to look. Last Tuesday, the container shipper announced that it had secured a USD 302 million term loan facility from a club of four financial institutions to purchase three 13,100 TEU vessels. The vessels are part of a nine-ship order in 2008 at Samsung Heavy Industries shipyard in Korea, valued at a combined total of USD 1.5 billion.

As part of its support for the country’s shipyards, the Export Import Bank of Korea (“KEXIM”) will be financing 70% of the USD 302 million term loan facility and the remaining 30% will be taken up by three mandated lead arrangers – BNP Paribas, Industrial and Commercial Bank of China (“ICBC”) and Ahli United Bank (“AUB”). BNP Paribas is also the structuring bank, the documentation bank, the agent and the account bank. Continue Reading

BLT Receives Backing from 6 Banks

From its humble beginnings as a small local Indonesian tanker operator, BLT’s successful listing in Singapore was catalytic to its transformation into one of the largest chemical tanker owners in the world. Its Singapore listing in 2006 shrewdly placed the company on the radar screens of many shipping banks in the city state, who have shown strong support of its expansion plans both domestically and internationally, despite industry watchers’ concerns that the company could be overly leveraged in pursuit of growth.

On Monday, Singapore listed owner Berlian Laju Tanker (“BLT Tanker”) announced the completion of the largest term facility it has ever completed. Six commercial banks, DnB NOR Bank, Nordea Bank, Standard Chartered, ING, NIBC and BNP Paribas have all committed to provide BLT Tanker USD 685 million in a new landmark term facility. DnB NOR is the Facility Agent and Security Trustee. Continue Reading

China Shipbuilding Industry Co Rolls Out RMB 17.46 billion Private Placement

China Shipbuilding Industry Co will be carrying out a RMB 17.46 billion (USD 2.6 billion) private placement to fund the acquisition of four shipbuilding companies. The Shanghai listed subsidiary of state-owned shipbuilding conglomerate China Shipbuilding Industry Corporation (“CSIC”) will be placing out 2.52 billion new shares at RMB 6.93 (USD 1.05) a piece to seven companies including its parent.

CSIC and two of its wholly owned flagship subsidiaries Dalian Shipbuilding Industry Group and Bohai Shipbuilding Group as well as China Huarong Asset Management Corporation, China Construction Bank, China Development Bank Capital and China Orient Asset Management Corporation have agreed to swap their combined majority stakes in four of CSIC’s shipyards, namely 100% of Dalian Shipbuilding Industry Corporation, 100% of Bohai Shipbuilding Heavy Industry, 100% of Shanhaiguan Shipbuilding Industry and 94.85% of Qingdao Beihai Shipbuilding Heavy Industry, for shares in China Shipbuilding Industry Co (see accompanying chart). Valued at around RMB 17.44 billion (USD 2.6 billion), the injection of assets is part of CSIC’s on-going efforts to create a listed flagship vehicle, which will also equip China Shipbuilding Industry Co the ability to offer a complete suite of products including shipbuilding, ship repairing, ship conversion and the manufacturing of warship equipment. Continue Reading

Shanghai Launches Mega Ship Fund

A new wave of competition among Chinese cities appears to be emerging after a recession of enthusiasm in the development shipping funds. Following the inauguration of China Ship Fund in Tianjin city in December 2009, Shanghai is planning to launch its very own shipping fund in another effort to transform the city into a shipping and maritime hub by 2020.

According to local media reports, the government of Shanghai’s Hongkou District has roped in three other state affiliated companies to incorporate Shanghai Maritime Industrial Fund Management, which will invest in ports, shipbuilding, modern logistics and shipping service industries. A closer look at the shareholders behind the fund certainly reveals a well coordinated and determined effort by the Shanghai government to piece together a new industry focused investment product for investors. Continue Reading

In Conversation with Dagfinn Lunde, DVB Bank

Marine Money talks to Mr. Dagfinn Lunde, Member of the Board of Managing Directors at DVB Bank in Singapore, and hears his views on China, the current developments in global ship finance and the bank’s lending policies. Here are some excerpts.

Marine Money: Do you think the worst is over for shipping?

Mr Lunde: I would say the worst is over. December 2009 was basically the deepest point and clearly the picture looks better today. The demand side in shipping is fine, but we are still concerned with the problem of oversupply, particularly the larger dry bulk ships. In general, most of the segments except container boxes are in oversupply. We have too much shipping capacity at the moment and the reality is that we have more than three times as much capacity in the shipbuilding industry than what is needed for vessel replacement at a normal level. That is a dramatic situation ahead of us. Continue Reading

Buy-Out Fund in Default

Private Equity Fund Nautical Offshore (“SOS”), a SPV fund belonging to Affinity Equity Partners, had its controlling 54.8% stake in Singapore listed shipbuilder and offshore vessel owner/operator Jaya Holdings seized by its lenders after defaulting on the syndicated debt facility. Affinity Equity Partners is an independently owned buyout fund manager that was spun out of UBS Capital Asia Pacific – the private equity arm of UBS AG in March 2004. In 2006, SOS acquired a 29.3% equity stake in Jaya Holdings and subsequently raised its stake to a controlling 54.8%. A five year USD 233 million syndicated loan was utilised to finance the leveraged buyout.

According to Reuters, the syndicate of banks, as many as thirteen lenders, are in advanced discussions with several buyers. It is reported that SOS had attempted to offload its stake in Jaya as early in 2010, but few bids came in due to the bearish sentiments on the shipping market. Indicative pricing on SOS’s debt in the secondary market is priced 60 to 65 cents on the dollar today, which suggests that lenders would have to accept a haircut. Continue Reading

IPO Renaissance in Indonesian Shipping

Indonesia is one of Asia’s fastest growing economies and more shipping companies are hoping to take advantage of this rising optimism by taking a shot at the domestic IPO market. According to the local press, as many as four shipping companies are planning to launch their share offerings in the first half of 2011.

Among them, perhaps arguably the most exciting would be PT Buana Listya Tama’s share offering. The Indonesia and Singapore listed PT Berlian Laju Tanker (“BLT”) is reportedly planning to spin off this wholly owned subsidiary to raise up to USD 120 million. Eddy Sugito, Director of the Indonesian Stock Exchange (“IDX”), confirmed market rumours that the company has already submitted its IPO documents for approval. PT Danatama Makmur, JP Morgan Securities, Deutsche Bank and Standard Chartered Securities are said to be the appointed underwriters. Continue Reading

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.

Mega Convertible Bond Issue in the Works

Hong Kong and Shanghai listed China Shipping Development is planning a RMB 3.95 billion (USD 602 million) convertible bond issue. That could be the largest convertible offering by an Asian shipping company ever. The oil and bulk carrier division of state-owned China Shipping Group plans to make use of the six year bond proceeds to finance the construction of 19 new buildings – namely three 110,000 dwt oil tankers, eight 48,000 dwt oil tankers, two VLCCs and six 76,000 dwt bulk cargo carriers. The offering is only available exclusively to Chinese investors and existing holders of Shanghai listed shares or “A” shares of the company will be given preferential rights to subscribe for the bonds. The proposed convertibles will be marketed with an annual coupon range of 0.5% to 3% and are expected to be listed on the Shanghai Stock Exchange.

Unlike in many jurisdictions, companies raising money in China are required to list down the intended use of bond proceeds in greater detail and bondholders have a one-off right to ask for a partial or full redemption, should there be any material change. In a statement to the stock exchange, the company said the convertible bond issue will allow the company to pay a lower interest coupon payment than a straight bond issue and would not lead to any immediate dilution of the company’s basic earnings per share which would arise in the case of a new issue of shares. Continue Reading