SHIPPING TRUSTS see opportunity in shipping slump

www.fairplay.co.uk

SINGAPORE’S SHIPPING trusts are confident of weathering the downturn that has begun to hit shipping.

“We sit back, dip into our debt facility and ride this through,” said Thomas Preben Hansen, CEO of Rickmers Trust Management, which manages Rickmers Maritime backed by German shipowner Bertram R C Rickmers.

“Disappointing growth figures out of Europe and the US do not keep me awake at night,” Hansen told Fairplay.

That is because nine of the 11 ships coming on are fully financed by debt. The downturn, if it hits hard, will affect only a limited number of the Trust’s ships.

And when the market is down, Hansen is looking to buy what he calls “distress sales” from cash generated by big ships chartered out to big players.

“The market can do whatever it wants to do in the next five years,” said Hansen.

“If the market comes crashing down it brings opportunities to buy cheaper assets while my existing fleet is generating cash.”

Rickmers Maritime, which listed in Singapore in May last year, owns and operates its fleet of large container ships under long-term fixed rate charter contracts to leading container liner shipping companies.

From an initial contracted fleet of 10 container ships in the range of 3,450-5,060teu, the profile has grown rapidly. An additional 13 vessels, four of them of 13,100teu, have been contracted.

Fleet capacity will expand to 131,560teu once all 13 vessels are delivered by end 2010.

The four mega box ships have already been contracted to Maersk.

Charterers in the Trust’s portfolio include Evergreen group’s Italia Maritima, CMA CGM, Hanjin Shipping and Mitsui OSK Lines.

Four of Rickmers' box ships have been contracted to Maersk. Photo by Sim Kih

Singapore’s two other business trusts do not appear to be too worried either.

Pacific Shipping Trust, sponsored by container shipping operator Pacific Shipping Lines, has completed raising S$113.7 million from a preferential offering – although the sponsor had to mop up unsubscribed units to the tune of 144,525,240.

In total, 252,750,000 new units will be issued pursuant to the offer.

The financial turmoil impacted the issue directly as the unit price dropped below the offer price of S$0.45.

The new offering, however, had received overwhelming endorsement earlier from unit holders, which PST Management CEO Alvin Cheng sees as a strong vote of confidence for the trust’s “prudent capital and risk management strategies.”

With extra cash in its bag the PST now has the capital cushion to grow its fleet and diversify its client base.

First Ship Lease Trust has the most diversified fleet profile of the three.

Despite the financial crisis, it has managed to obtain an additional revolving credit facility of up to US$65 million on top of an existing US$450 million arrangement.

With the finance tied for an additional ship, FSL Trust Management is providing a distribution per unit guidance of 3.08 US cents for 4Q08, which is higher than 3Q08's DPU of 3.05 US cents.

Commenting on this, Philip Clausius, President and CEO of FSL Trust Management, said: “Given the current volatility in the capital markets and our conservative business model with long-term secured cash-flows, no unfunded commitments and no near-term refinancing risks, we think this is an extraordinary risk-adjusted rate of return.”


Article is reproduced by courtesy of Fairplay, an international shipping weekly.