COSCO’s COMPLEXITY REVEALED

HONG KONG – China. Ocean Shipping (Group) Co. is a masterpiece of financial complexity befitting a sprawling 540- ship company with 20m dwt in tonnage and 80,000 employees. The funding logic is shaping up to both greater off-balance sheet financing and continued aspirations for public listings. Most important for international bankers is the increasing access to funds from the domestic financial markets, despite the most recent string of five postPanamax containerships done on an off balance sheet function. The domestic market however has also been helpful with an award- winning domestic bond issue, a new Shanghai-listed unit and the early 2002 refinancing of a $600m overseas debt by domestic banks.

Bankers also believe that the country’s first two LNG ships of which COSCO will hold a part will be mostly financed by mainland banks.” There is a tremendous liquidity among the mainland banks looking for places to put their money. We can see that deals are being done at rates that foreign banks could not consider,” said one banking source in Hong Kong. The financing for the two vessels in the Guangdong LNG project is expected to be advised by Japan’s Sumitomo-Mitsui Banking Corp.

Spreads for domestic deals are dipping below even the 80 bp mark, even better than the 100 bp rate that COSCO could usually enjoy for its overseas fundraisings. “This type of thing is too close to the cost of capital and no one is willing to lock in their balance sheet for that long,” commented the banker.

This is only an excerpt of COSCO’s COMPLEXITY REVEALED

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.