SSG No 10 - Shipgaz

finANCE & INSURANCE
Editor: Petter Arentz ~ Phone +47 33 40 12 00 ~ E-mail: petter@shipgaz.com
Fred. Olsen
secures facility
Fred. Olsen Production (FOP) has secured
a new ten-year, USD 500 million revolving
credit facility from banks led by DnB Nor,
Nordea and Fortis Bank. When we went to
press the final terms were not agreed and it
could be end May, early June before all is
agreed. Part of the facility will be used to
restructure an existing facility, the rest to
finance ongoing FSO/FPSO projects. FOP
has just announced a strategic cooperation
with the Japanese Marubeni Corporation
in East Asia.
OMI acquisition
Den Danske Bank and HSH Nordbank are
to raise the USD 1.4 billion in bridging
finance to cover the Teekay Shipping and
Torm purchase of OMI Corp. The arrangement
is that HSH Nordbank will provide
Teekay with USD 700 million for their 50
per cent share of the purchase and HSH
joins with Den Danske Bank to finance
Torm’s share of the purchase, Both loans
are secured at 0.50 per cent over Libor
(London Interbank Offered Rate) on 12
months terms.
Teekay Shipping will take OMI’s seven
suezmax tankers and eight product carriers,
while Torm acquires the remaining 26
product tankers. Torm is flush with cash
after selling its stake in Norden for USD
713 million last month. Eventually some
of that money will go towards the OMI
purchase, but Torm has also announced it
will buy back up to 15 per cent of its share
capital and propose a split.
Pragmatic view of 2007
Insurers are taking a pragmatic view of possible
claims in 2007. 2006 was a quite
benign year for natural catastrophes and
man-made disasters, after insurance losses
of USD 65.0 billion in 2005. Losses in the
London market alone were USD 6.0 billion
from the US hurricanes Katrina, Rita and
Wilma. Sigma recorded 53 shipping disasters
in 2006 mostly fishing boats, but we all
remember the ferry I-Salam Boccaccio with
1,026 dead.
Pressure to cut
dry bulk commissions
Dry bulk freight rates have reached new,
sizzling record highs in an upturn, which
began a year ago. Owners of dry bulk tonnage
are as delighted as the charterers are
dismayed. The main reason for the strong
capesize market is congestion in Australian
ports and higher Chinese demand. On
certain front haul routes for 170.000tonners
the capesize rates could reach
USD 140,000 per day.
Paid too much
The tanker market has not seen anywhere
near the same strong rates. Since tanker
prospects are considered to be weaker than
for dry bulk, tanker owners are working to
consolidate.
The Teekay Shipping and Torm move on
the tanker owner/operator OMI Corp is a
case in mind, even though many analysts
are saying they paid too much at 20 per
cent above the OMI fleet’s net asset value
(NAV).
Rising commissions
While the going is good dry bulk owners
see no reason to consolidate. Meanwhile
dry bulk charterers are grappling with
exceedingly high commission bills.
Currently brokers charge 1.25 per cent
Most ship owners will grumble about the
raise in cost of their liability insurance, but
such misgivings are not justified, according
Michael Butler, who is an insurance partner
at Moore Stephens.
Butler says to the firm’s newsletter
Bottom Line, that in most cases increased
P&I premiums are maintaining solvency in
the marine mutual market.
Main arguments for lower, or no
increases, are an improved investment
market and a good shipping market. Butler
argues that investment income should
never be used to massage underwriting
Capesize spot rates
in the Atlantic
Time Charter Equivalent. ‘000 USD/day
commission on longer deals, but are under
considerable pressure to lower their fee to
1.0 per cent or even lower. With commissions
running in excess of USD 1.0 million
on a five-year charter, no wonder charterers
are putting pressure on the brokers.
Owners to accept increased P&I cost
results. Most clubs are now well placed to
meet the Solvency II capital adequacy
regime, but the clubs still requires he
higher premiums to meet what they perceive
as a scenario of more vessels and, as a
consequence, more claims.
If the cost of claims increases, premiums
must come up; after all, the P&I clubs are
mutuals.
Owners want P&I clubs to be financially
healthy to be able to meet claims, even if it
means higher premiums. It is not justified
to resist those increases, says Michael
Butler.
82 SCANDINAVIAN SHIPPING GAZETTE • MAY 21, 2007
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