NYK ACQUIRES TAIHEIYO KAIUN

In addition to its double bond issue, NYK has appointed Mitsubishi UFJ Securities to carry out its share swap with financially troubled Taiheiyo Kaiun. On May 28, NYK announced that it will bail out Tokyo listed Taiheiyo through the issuance of new shares and equity-swap arrangements. Taiheiyo is currently an affiliate of NYK and takes pride in managing NYK’s tanker fleet. It was in 2001 when the mega carrier transferred all of its tanker management business to Taiheiyo and took up a nearly 23% stake in the company.

Trouble started when Taiheiyo diversified into the dry bulk sector during the boom. In order to profit from the sky-rocketing charter rates during that time, Taiheiyo chartered in a number of dry bulk vessels and chartered them out at higher rates. This high risk, high return model churned out profits for the company but losses started to accumulate very quickly when the dry bulk market crashed. In October 2008, an unnamed foreign sub-charterer informed Taiheiyo that it was no longer able to fulfill its contractual obligations for four Panamax/Handymax bulk carriers. To make matter worse, less than 5 months later, South Korea’s Samsung Logix filed for receivership in Korea and made clear that likewise unable to honour its charter contracts concerning two Handymax bulkers. Taiheiyo managed to return one of the six vessels to the owner, but it had to continue paying its charter hires for the remaining five vessels and in an effort to stem the losses, Taiheiyo bit the bullet and paid JPT 7.5 billion (USD 78 million) to the owners as cancellation fees. An unfortunate victim caught in between the charter market breakdown, Taiheiyo sold all its five VLCCs to NYK, but even that could not stop the company from bleeding financially. Taiheiyo has projected a net loss of JPY 5,140 million (USD 53 million) for FY2010. As at March 2009, Taiheiyo owned 6 tankers, 1 capesize and 2 wood chip carriers and manages another 20 vessels, mainly tankers from NYK.

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