U.S. Flag Ship Financing

JP PRICES SALCHUK DEAL AT LIBOR MINUS 5

As we went to press, Marine Money heard some of the best news ever out of the Title XI office in a long time; JP Morgan sold $172.5 million in bonds to finance Tote’s 2 new ro/ro vessels the first of which will be delivered from NASSCO at the end of 2002. We say that it’s good news because this deal involves a good company that is investing in the US maritime industry, the use of a government guarantee program to provide 87.5% financing for a solid project, and a very creative execution by a US investment bank. JP sold the deal in two traches; one tranche was $120m of 25- year fixed rate notes and the other was $52m in twelveyear floaters. The floaters came in at LIBOR minus 5 and the fixed rate piece came in at about 6.3%!!! In addition to the high leverage, low pricing and long term, we think JP did some extremely clever structuring to increase demand for the paper. Knowing that there was a lot of money parked in money market funds that are not permitted to make investments with a duration of more than one year, JP made the floaters puttable (ie able to be put back) to the company within each year thereby allowing money funds to buy the Salchuk bonds. Well done by all.

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