asia keeping active
TRANSCRIPT
VOLUME 5 ISSUE 9
March 13, 2017
EDITORIAL STAFF
Andrew B. Oates
Business DevelopmentManager
MARINE MONEY ASIA
PTE LTD
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Singapore, 088 524
Tel: +65 6221 7656
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ASIA KEEPING ACTIVE
Marine Money Asia
We aim to give you a regular glimpse of Asian shipping and finance market intelligence in a single, easily digestibledocument. We are here to share our knowledge on the who, what and where of the business.
If you have ideas, news to tell us or if you want to contribute to Marine Money Asia, please contactAndrew B. Oates at [email protected] or [email protected] or call +65 9012 0256.
Marine Money Asia Events in 2017
10th Annual Hong Kong Ship Finance Forum – Hong Kong, 6 April 2017
Marine Money China Ship Finance & Offshore Summit – Shanghai, 9 & 10 May 2017
16th Marine Money Week Asia – Singapore, 19 & 20 September 2017
11th Annual Korea Ship Finance Forum – 1 November 2017
2nd Annual Japan Ship Finance Forum – TBD November 2017
Ezra Holdings continues to face financialuncertaintyEzra Holdings and her subsidiaries continue to facefinancial uncertainly as new claims mount up. Lastweek, joint venture Emas Chiyoda Subsea filed forChapter 11 protection from the Southern District ofTexas Bankruptcy Court. Ezra is 40% owner of thecompany with Chiyoda owning 35% and NYK 25%.Ezra however is guarantor of the $900 million debts ofECS, of which $400 million are chartering liabilities and$500 million are creditor obligations. Last month Ezrahad warned that $170million of investments and loansto ECS may be at risk of being written off.
This week it emerges that ICBC Leasing, China’s largestfinancial leasing company to shipping, is pursuing aclaim of $194.5 million from Ezra subsidiary EMASOffshore Ltd (EOL). ICBCL special purpose vehicle HaiJian 1401 Pte. acquired the vessel from Ezra Holdingssubsidiary EOC Ltd in early 2014 for $200 million andbareboated it back for 10 years on a “hell and highwater” basis, with Ezra Holdings the guarantor of thecharter payments. The claim is in respect of a charterdefault of $1.58 million.
Hyundai Heavy Industries talks of a$1billion order for new VLCCs In desperate need of new orders, Hyundai HeavyIndustries (HHI) has indicated that it is in serious talksfor up to ten VLCCs from Hong Kong-listed Brightoil andfrom Singapore bunkering company Sentek. The valueof the combined orders could be $1 billion.
OOIL ends 2016 with a $219 million loss Orient Overseas (International) Ltd (OOIL), the parentof liner company OOCL, has ended 2016 in the red tothe tune of $219 million as opposed to a profit of $283million for the 2015 fiscal year. This was largely due toweaker revenue from Asian and European servicescausing declining revenue of 11% year-on-year at$5.3billion with costs down only 4.4% to $5billion.
OOIL Chairman C.C. Tung stated that 2016 saw someof the most difficult markets in the industry’s historywith low growth in most regions and an overhang ofexcess supply leading to challenging conditions in manytrade lanes. Also fuel prices rose in the second half ofthe year and industry performance was badly affectedby freight rates that frequently sank below the levelsseen in 2009. Mr. Tung also commented that, lookingahead, the slowdown in growth seen in several of thelarger Asian economies has not caused any hard land-ings and the group draws some reassurance from thegrowth in ASEAN volumes as well as the improvingdynamics of certain trades including the Australiantrade.
However, the main cause of the declining performance,the East-West trades, do still need to continue to pickup. He continued, the global environment remains veryuncertain with protectionism, trade and geopolitical fric-tion, and a slowdown in the growth of globalisation allpotential challenges for the outlook for the industry.
Marine Money Asia Edition March 13, 2017
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ASIA KEEPING ACTIVE
If Brightoil order ten tankers it would triple the company’s VLCCfleet to fifteen, with five currently in the water built in 2012 and2013 also at HHI. It was stated that attractive low shipbuildingprices are a factor that is encouraging Brightoil to order theships with the current newbuilding price for VLCCs at less than$80million. Previously, Brightoil has paid over $107million forVLCCs. Delivery of the newbuilds is likely to be in 2019 – 2020.
In a separate deal, Sentek is discussing an order for two VLCCsat HHI again with delivery in 2019. The company owns twoolder vessels and uses them mostly for storage. Again the inex-pensive contracting price is assumed to be the incentive for theinterest to order.
Marine Money Asia attends Marine Money DubaiconferenceThat there is still distress in the shipping and offshore marketwas made clear at the 13th Annual Marine Money Gulf ShipFinance Forum, but the message came clearly through thatthere is also opportunity for fresh investments by owners andfor banks without legacy issues. The 13th Annual Marine MoneyGulf Ship Finance Forum in the Emirates Towers Hotel on 7thMarch attracted 127 delegates from 13 countries.
Some major takeaways from the conference included:
• Dubai is poised to enter the Top 10 maritime hub list by 2020• Maritime accounts for 7% of UAE’s GDP
Economic Outlook
• The US economy is already close to full employment andTrump’s domestic infrastructure policies, when implemented,will create more jobs still
• The FED is expected to hike rates three times in 2017,starting next week
• Europe is braced for another bout of populism in France andHolland, and even with German elections later in the year
• China risks remain but growth will continue at about 6.5%p.a.
• Chinese real estate accounts for 15% of GDP and authoritiesare engineering a soft landing so as not to create shockwaves
• New buzz words since the new administration came in theUS – fake news, media, immigration, tweet, protectionism,Russia
• Oil will like average at $55 in 2017• Average GCC growth will be about 2.5% in 2017 but budget
deficits will need high sovereign debt issuance, a repeat ofthe $40 billion seen in 2016
Offshore and Distress
• There is a 30% decline in utilization rates compared to a yearago. That is bad, but not as bad as Southeast Asia
• In global terms, of 3480 OSVs in the market there is onlydemand for 2000 and 350 are on order and still to be deliv-ered. About 730 are stacked, or 20% of the fleet.
• There is not likely to be a rate recovery until 2018 – 2019 • In 2013 there was $650 billion of E&P investment, in 2016
about $400 billion. 2017 will likely be another 10% down.• The oil price is likely to be at about $60 until 2020• Shale oil in the US is currently transported to the ports by
train and truck. If President Trump builds pipelines, and hesays he will, the cost and efficiency will change and shale willbecome a huge game changer
• In offshore, consolidation will only work if capacity is takenout of the market.
Bank Finance
• For banks, it is getting increasingly difficult to kick the candown the road
• Basel IV kicks in in 2019 and will create a new disciplinewhich may bring pricing to more realistic levels
• For a bank with no baggage, 2017 is a good time to get intoshipping
• But terms must be cautious because however attractive assetprices look, there is still no cash flow incentive
• Any deals done today must reflect the current state of themarket and of the world today – cash flow, risks, etc.
• When an investment manager looks at a shipping deal itcompares yield from any other kind of investment – evensovereign bonds in some cases give attractive returns – sothe internal competition in banks for capital for shipping ishuge
• Currently with shipping margins so low, alternative financingwith 6% to 15% return hurdles are just too high
• In some cases there is a disconnect within banks betweenrelationship managers, the credit department and the legaldepartment
Chinese Financial Leasing
• Leasing is not a case of pushing Chinese shipyards to the restof the world, more it is an internationalization of China andan export of its currency
• There are now only about 50 Chinese shipyards which areactive, hundreds of others have been mothballed
• Chinese leasing companies will happily finance vessels builtin Korea and Japan. There is no requirement for Chinesevessels although a combination of leasing with Chinesenewbuilds may get slightly improved terms
• Vessels without cash flow (dry bulk) are doable only againsta strong balance sheet or shareholder support
• For the Chinese leasing companies much of their businessboils down to name lending and cash flow lending againstlong charters
General
• Investing in shipping today with a three year time horizonshould be investable
• The major source of financing these days is China• There is a need for a pain share / gain share philosophy when
trying to handle distress situations
Marine Money Asia Edition March 13, 2017
ASIA KEEPING ACTIVE
Page 3
March 13, 2017
The offshore industry is struggling through historic lows of asset prices, while many offshore bankruptcies are being announced around the world. Problems began with the drop in oil prices,
lowering the demand for research projects. Now the industry is facing a huge oversupply of vessels, leading to a build-up of orders scheduled for delivery in 2017.
There are over 400 OSV vessels on order throughout the world, with a large majority of these currently due be delivered in 2017.
But how many of these vessels will we see on the water, delayed or cancelled completely?
Marine Money Asia Edition March 13, 2017
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SELECTED SHIPPING BONDS
Currency
Amount outstanding
(million) Mid priceYTW1
(bps)STW2
(bps)YTM3
(bps)STM4
(bps) MaturityRatings
(Moody/SP/Fitch)
ASL Marine Holdings4.750% Senior Unsecured Notes due '17 SGD 100 55 2,925 2,805 2,925 2,805 28-Mar-20 - / - / -5.350% Senior Unsecured Notes due '18 SGD 50 55 2,301 2,137 2,301 2,137 1-Oct-21 - / - / -
BW Group6.625% Secured Notes due '17 USD 194 101 389 315 389 315 28-Jun-17 Ba1 / BB / -1.750% Exchangable Notes due '19 USD 250 94 415 281 415 281 10-Sep-19 - / - / -
China Shipping Overseas Finance 4.250% Senior Unsecured Notes due '19 USD 500 103 282 148 282 148 28-Jan-19 A1 / - / -
COSCO Finance 4.000% Senior Unsecured Notes due '22 USD 1,000 103 340 132 340 132 3-Dec-22 A1 / - / -
Ezion7.000% Junior Subordinated Notes Perpetual SGD 150 70 873 781 873 781 NA - / - / -4.875% Senior Unsecured Notes due '21 SGD 150 63 1,951 1,787 1,951 1,787 11-Jun-21 - / - / -5.100% Senior Unsecured Notes due '20 SGD 55 63 2,314 2,194 2,314 2,194 13-Mar-20 - / - / -4.850% Senior Unsecured Notes due '19 SGD 50 73 2,405 2,285 2,405 2,285 23-Jan-19 - / - / -4.600% Senior Unsecured Notes due '18 SGD 60 83 2,007 1,915 2,007 1,915 20-Aug-18 - / - / -4.700% Senior Unsecured Notes due '19 SGD 110 68 2,485 2,365 2,485 2,365 22-May-19 - / - / -3.650% Senior Unsecured Notes due '20 SGD 120 101 334 213 334 213 5-Aug-20 Aa1 / - / -
Ezra Holdings4.875% Senior Unsecured Notes due '18 SGD 150 10 77,149 77,077 77,149 77,077 24-Apr-18 - / - / -
Hanjin Shipping5.900% Senior Unsecured Notes due '17 KRW 200,000 D D D D D 7-Jun-17 - / - / -5.820% Convertible due '18 KRW 10,600 D D D D D 8-Jun-18 - / - / -5.660% Convertible due '18 KRW 6,400 D D D D D 26-May-18 - / - / -5.660% Convertible due '18 KRW 20,000 D D D D D 6-Apr-18 - / - / -6.010% Convertible due '18 KRW 12,000 D D D D D 9-Feb-18 - / - / -
Hyundai Merchant Marine6.200% Senior Unsecured Notes due '17 KRW 28,166 50 1,816 1,618 1,816 1,618 7-Jul-21 - / - / -5.300% Senior Unsecured Notes due '17 KRW 159,772 53 1,798 1,600 1,798 1,600 7-Apr-21 - / - / -8.520% Convertible due '18 KRW 12,800 NA NA NA NA NA 30-Mar-18 - / - / -
Logindo Samudramakmur Tbk PT2.930% Senior Unsecured SBLC backed Notes due '20 SGD 50 100 280 160 280 160 3-Feb-20 - / AA- / -
Marco Polo Marine5.750% Senior Unsecured Notes due '16 SGD 50 25 9,252 9,160 9,252 9,160 18-Oct-19 - / - / -
Miclyn Express Offshore8.750% Secured Callable Notes due '18 USD 150 91 1,504 1,370 1,504 1,370 25-Nov-18 - / - / -
Mitsui OSK Lines0.461% Senior Unsecured Notes due '17 JPY 20,000 100 26 64 26 64 12-Jul-17 NR / - / -1.139% Senior Unsecured Notes due '22 JPY 10,000 101 103 115 103 115 12-Jul-22 NR / - / -1.999% Senior Unsecured Notes due '19 JPY 20,000 103 53 79 53 79 27-May-19 - / NR / -
Nam Cheong5.000% Senior Unsecured Notes due '17 SGD 90 35 42,246 42,175 42,246 42,175 28-Aug-17 - / - / -5.050% Senior Unsecured Notes due '19 SGD 200 25 7,828 7,708 7,828 7,708 26-Aug-19 - / - / -6.500% Senior Unsecured Notes due '18 SGD 75 30 16,759 16,667 16,759 16,667 23-Jul-18 - / - / -
Neptune Orient Lines4.400% Senior Unsecured Notes due '19 SGD 300 92 960 840 960 840 8-Nov-19 - / - / -4.400% Senior Unsecured Notes due '21 SGD 300 78 1,099 935 1,099 935 22-Jun-21 - / - / -8.000% Senior Unsecured Notes due '24 USD 116 66 NA NA NA NA 15-Jan-24 WR / - / -4.250% Senior Unsecured Notes due '17 SGD 400 100 782 715 782 715 26-Apr-17 - / - / -4.650% Senior Unsecured Notes due '20 SGD 280 83 1,061 941 1,061 941 9-Sep-20 - / - / -
Nippon Yusen0.472% Senior Unsecured Notes due '17 JPY 20,000 100 (2) 36 (2) 36 16-Jun-17 NR / - / -1.782% Senior Unsecured Notes due '19 JPY 30,000 104 16 43 16 43 9-Aug-19 - / - / -2.050% Senior Unsecured Notes due '17 JPY 30,000 101 (11) 27 (11) 27 20-Jun-17 - / NR / -
Noble Group6.750% Senior Unsecured Notes due '20 USD 1,177 95 875 710 875 710 29-Jan-20 B2 / B / BB+
Pacific Basin3.250% Convertible due '21 USD 125 99 393 258 362 154 3-Jul-21 - / - / -
Pacific International Lines7.250% Senior Unsecured Notes due '18 SGD 130 81 2,294 2,202 2,294 2,202 16-Nov-18 - / - / -5.900% Senior Unsecured Notes due '17 SGD 300 93 2,839 2,768 2,839 2,768 17-Jul-17 - / - / -
Pacific Radiance4.30% Senior Unsecured Notes due '18 SGD 100 35 11,895 11,803 11,895 11,803 29-Aug-18 - / - / -
Perisai Petroleum Teknology6.875% Senior Unsecured Notes due '16 SGD 125 D D D D D 3-Oct-16 - / - / -
Polaris Shipping Co Ltd.5.728% Senior Unsecured Notes due '16 KRW 10,000 101 484 345 484 345 14-Nov-17 - / - / -5.728% Senior Unsecured Notes due '17 KRW 30,000 101 607 435 607 435 14-Nov-18 / /
Precious Shipping PCL5.250% Senior Unsecured Notes due '21 THB 3,590 NA NA NA NA NA 22-Jan-21 - / - / -
Rickmers Maritime5.728% Senior Unsecured Notes due '16 SGD 100 10 547,500 547,433 547,500 547,433 15-May-17 - / - / -
SK Shipping5.370% Senior Unsecured Notes due '18 KRW 50,000 102 465 318 465 318 4-Jul-18 - / - / -3.780% Senior Unsecured Notes due '17 KRW 200,000 101 146 (1) 146 (1) 29-May-17 - / - / -
Swiber Capital6.250% Islamic Financing due '17 SGD 50 D D D D D 30-Oct-17 - / - / -6.500% Islamic Financing due '18 SGD 150 D D D D D 2-Aug-18 - / - / -
Swiber Holdings5.550% Senior Unsecured Notes due '16 SGD 100 D D D D D 10-Oct-16 - / - / -7.125% Senior Unsecured due '17 SGD 160 D D D D D 18-Apr-17 - / - / -
Swissco Holdings Ltd7.125% Senior Unsecured due '17 SGD 100 15 52,737 52,657 52,737 52,657 16-Apr-18 - / - / -
Vallianz Holdings4.000% Senior Unsecured Perpetual USD 23 NA NA NA NA NA NA - / - / -
1 Yield to worst on mid price 2 Spread to worst on mid price3 Yield to maturity on mid price4 Spread to maturity on mid price
Marine Money Asia Edition March 13, 2017
Page 5
Forum Schedule 2017/2018MARINE MONEY FORUMS AND CONFERENCESAs the premier provider of ship finance news, data and analysis, Marine Money hosts the world’s most important ship finance forums and conferences. Where theformation of capital for shipping is taking place, Marine Money conferences provide the most educational and best networking opportunities available in the industry.
New York
Oslo
Athens
Hamburg
Singapore
Hong Kong
Istanbul
Dubai
Tokyo
Rio de Janeiro
Busan
Monaco
London
HoustonShanghai
Geneva
March 16, 2017 Singapore Offshore Finance Forum Singapore
April 6, 2017 10th Ann. Hong Kong Ship Finance Forum Hong Kong
April 26, 2017 1st Marine Money Cyprus Forum Limassol
May 3, 2017 7th Ann. Houston Offshore Finance Forum Houston, TX
May 9-10 Marine Money China Ship Finance & Offshore Summit Shanghai
June 1, 2017 19th Ann. Norway Ship & Offshore Finance Forum Oslo
June 15, 2017 5th Ann. Marine Money Geneva Forum Geneva
June 19-21, 2017 30th Ann. Marine Money Week New York City
September 19-20, 2017 16th Ann. Marine Money Week Asia Singapore
September 26, 2017 10th Ann. Superyacht Finance Forum Monaco
October 2017 TBA Brazil Offshore Finance Forum Rio de Janeiro
October 2017 TBA 19th Ann. Greek Ship Finance Forum Athens
November 1, 2017 11th Ann. Korea Ship Finance Forum Busan
November 2017 TBA 2nd Ann. Japan Ship Finance Forum Tokyo
November 2017 TBA 18th Ann. Ship Finance Forum New York City
November 2017 TBA Mexico Offshore Finance Forum Mexico City
January 2018 TBA 9th Ann. London Ship Finance Forum London
February 2018 TBA 17th Ann. German Ship Finance Forum Hamburg
March 2018 TBA 14th Ann. Gulf Ship Finance Forum Dubai
Limassol
Marine Money Asia Edition March 13, 2017
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