Effects of the financial and shipping crisis on the project finance market What will the future bring?

Transcription

1 Effects of the financial and shipping crisis on the project finance market What will the future bring? This document is for the use of the intended recipient only and should not be copied or distributed to any other person. Bulkforum 11. november 2009 Erlend Torsen NRP Finans

2 Agenda The NRP Group Overview of the NRP Group Activities of NRP Finans Market overview the perfect storm? Case study I Bulk Transloading DIS Structure and financing Value deterioration Re-structuring Cause and effects Conclusions The way forward Still possible to do KS deals Opportunities Summary and conclusions 1

3 The NRP Group of companies The board of AS Ragnvald Risan Christian Ness Trygve Munthe Morten Kielland Ole-J. Figenbaum Øystein Bøe Chairman Brokerage & Investment advice Securities Asset Syndication Capital Asset Management Pooled funds Sep. accounts Corporate Management services NRP Securities (2005) NRP Finans (2000) NRP Asset Management (2004) NRP Real Estate (2008) NRP Investm. Management (2008) NRP Forr.førsel (2000) NRP Investorservice (2003) NRP Consulting (2006) Aker Eiendomsdrift (2001) Trading desk and Corporate finance -Investment banking boutique focusing on brokerage, financing and M&A within Shipping, Offshore, Fishing and Real Estate Single project arrangements (debt & equity) - Placed shipping and real estate projects with an asset value of USD 5.0 bn. Asset management - Managing 7funds within real estate, shipping, fish and high yield bonds, with a total equity of NOK 1 billion Real Estate Funds - Established Dec. 2008, aiming to expand group s business in real estate funds. Investment Management - Investment advisory and management services on behalf of private and institutional separate account clients. Corporate Management - Corporate Management for some 40 shipping and 30 real estate projects Accounting, tax and consulting - Provides high quality services and advice to professional clients Consulting - Provides advisory/ consulting (tax, financial, corporate) to our clients Property management - Renders services to NRP and external real estate owners Key information (as of January 1 st 2009) Approx. 50 employees. Turnover 2008 NOK 110 mill, sound profits. Placed projects for NOK 28 bn, of which USD 2.6 bn in shipping and NOK 13 bn real estate. Global shipping activity, Scandinavian real estate activity. 7 funds within Shipping, Real Estate, High Yield Bonds and Seafood. Provides a wide specter of financial services. Slide 2

4 NRP Finans NRP Finans AS Haakon VII s gate 1, 7.Etg. Postboks 1358 Vika 0133 Oslo Knut Ekjord knut.ekjord@nrp.as Christian Ness c.ness@nrp.as Erlend Torsen erlend.torsen@nrp.as Morten Berg m.berg@nrp.as Henrik Ness henrik.ness@nrp.as Ragnvald Risan r.risan@nrp.as Torstein Bomann-Larsen torstein.bomann-larsen@nrp.as 3

5 NRP Finans AS Syndication of shipping, offshore and real-estate projects Arranged a total of 86 shipping projects consisting of 137 vessels and for a total value of USD 2,6 billion across multiple segments Weighted average annual return of 21% since

6 Characteristics of the KS market Sale lease back focused (bareboat) Gross value of arranged projects (MUSD) Counterpart focused Not tonnage Preference of 2nd hand tonnage Flexible strucures, put/call options, optional periods Professional Investors with shipping knowledge Project risk; Charterers performance Residual value 5

7 The advantages of Sale lease back for shipowners Up to 100% financing Share issues are expensive when shares are valued at below NAV Release of funds to expand/ order new ships Off balance financing Cost and time efficient Risk reduction Flexible structures, i.e. put/call options 6

8 Status shippingmarket Demand hit by global economic downturn Supply increases though substantial orderbook in most segments, will take a long time to absorb Significant drop in earnings across all segments in many segments earnings are barely covering operating expenses Significant drop in asset values across all segments some segments have lost as much as 80% from peak values Banks closed for new business credit very limited Owners and operators facing liquidity problems 7

9 Significant fall in asset values and earnings - Container Containership 3mecharter rates, 6-12 mnths Containership secondhand prices, 5 yr USD/day 30 Mill USD mars/04 sep./04 mars/05 sep./05 mars/06 sep./06 mars/07 sep./07 mars/08 sep./08 mars/09 sep./09 mars/10 sep./10 mars/11 sep./11 mars/12 sep./12 mars/13 sep./ * 3500 TEU 4400 TEU 2000 TEU 2750 TEU 2500 TEU 1000 TEU 1700 TEU 1.1/1.2 k TEU 1.5/1.7 k TEU 2.5/2.8 k TEU 3.2/3.6 k TEU 4.2/4.4 k TEU 6.5/6.8 k TEU 8

10 Significant drop in values and earnings Tankers and Bulkers 9

11 Consequences for KS projects Several counterparties on projects have filed for bankruptcy Several counterparties on projects have asked for reduced or restructured hire payments Several projects with market exposure facing reduced income, resulting in cashflow challenges Breach of bank covenants: Minimum value Working capital Charterer default or breach of charter party Redelivery of vessels Foreclosure Call for uncalled capital To regain compliance To rectify breaches related to working capital Extraordinary downpayments of mortgage loans Margin increase Several projects were all capital is lost Several projects facing severe challenges 10

12 Case study Bulk Transloading DIS Established 2007 three Bulktransloaders (Panamax, 96,93,82 built) on 5-15 years BB charter, with hire purchase to ETA Star Holdings, Dubai Project price USD 117,000,000 Paid in equity of USD 14,400,000 Sellers credit of USD 11,500,000 Mortgage finance of USD 91,100,000 Uncalled capital USD 7,500,000 Estimated IRR of 15,4% p.a Yield on total capital less sellers credit approx 8,2% Front heavy rate structure and projected payback of equity within 4-5 years Rate structure Year 1-2 Year 3-5 Year 6-15 USD 78,000 per day USD 45,175 per day USD 14,325 per day 11

13 Case study Bulk Transloading DIS Rate structure and repayment Mortgage facility; Approximately 80% of the purchase price 120 months term Margin LIBOR bp Minimum Value Clause 115% of the facility the first three years and 130% of the facility for the remainder Repayment Year 1-2 Year 3-5 Year 6-15 USD 4,900,000 quarterly USD 2,287,500 quarterly USD 562,500 quarterly 12

14 Case study Bulk Transloading DIS Project established 13

15 Case study Bulk Transloading DIS Status after one year USD 4,3 mill paid out in dividends 14

16 Case study Bulk Transloading DIS Status after 1,5 year USD 5 mill of USD 7,5 mill of uncalled capital, called upon Margin increase Extraordinary downpayment of USD 5 mill 15

17 Case study Bulk Transloading DIS Status after 2,0 years/today Restructure of hire Flattening Higher yield on total capital Remaining uncalled capital paid in (USD 2,5 mill) Waiver on minimum value clause until

18 Bulk Transloading DIS - status today If the charterer is able to perform on his commitments, the projects will give investors a substantial cashflow. Equity today priced at USD 7 mill. Total cashflow to equity in the project estimated top USD 58 mill (until 2022) Expect to pay dividends from

19 Possibilities in today's marked, low entry point 1. A vessel has a newbuilding price and a scrapping price 2. The newbuilding parity line is the theoretical replacement cost of a vessel at any age 3. The parity line will shift according to market conditions 18

20 The way forward future of the KS market Bank financing challenging Banks may finance deals in exchange for injection of fresh equity, or become provider of new deals (failed projects) Yesterdays deal Lower gearing, non recourse financing Reputable counterparts more important than ever Future deals Possibilities in the 2nd hand market for parts as estimated return ranges between 20-30% p.a. The collapse of the shipping market makes for interesting investment opportunities going forward as down side appears to have been reduced, but it will take time before volumes return 19

21 Kontaktdetaljer NRP Finans AS Haakon VII s gate 1, 7.Etg. Postboks 1358 Vika 0133 Oslo Knut Ekjord knut.ekjord@nrp.as Christian Ness c.ness@nrp.as Erlend Torsen erlend.torsen@nrp.as Morten Berg m.berg@nrp.as Henrik Ness henrik.ness@nrp.as Ragnvald Risan r.risan@nrp.as Torstein Bomann-Larsen torstein.bomann-larsen@nrp.as Slide 20