Neptune Orient Lines (NOL)

Jun 10, 2011
NOL to issue $300m in notes at 4.4% interest
By Ian Poh

SHIPPING giant Neptune Orient Lines (NOL) yesterday announced it will issue $300 million worth of notes to help pay for new container ships.

The move is part of a recent trend here for organisations to raise funds by issuing debt rather than by seeking a bank loan.

The notes are being offered under NOL's US$1.5 billion (S$1.8 billion) euro medium-term note programme. The first part of the programme, raising $280 million, was launched in September last year.

The latest issue, due in 2021, will pay investors 4.4 per cent interest a year and will be issued on June 22, the group said in a statement.

NOL added that it had appointed Standard Chartered, HSBC and DBS banks as joint lead managers and book runners, with DBS also serving as the global coordinator.

Its announcement comes on the heels of property group CapitaLand's statement on Tuesday that it would issue US dollar secured floating rate notes.

The developer's issue, through its units CapitaCommercial and CapitaMall Trusts, is due in 2018 and is part of a US$10 billion medium-term note programme set up in September 2006.

Last Friday, the Housing Board also launched a new issuance of $350 million fixed rate notes under its $7 billion medium-term note programme.

'Issuers of notes are looking increasingly to this method to raise debt, rather than take a bank loan. This is because with the Singdollar bond market getting bigger, direct access to investors via the bond markets is easier,' said Mr Clifford Lee, head of fixed income at DBS.

'The 4.4 per cent interest rate is a competitive way to raise funding versus taking a bank loan.'

He added that corporate bonds also appeal to investors, who see them as a more attractive investment than the low interest rates currently offered by bank deposits.

NOL last month posted a first-quarter net loss of US$10 million for the period to April 8.

On Wednesday, it announced changes to come in the senior management of its container shipping business APL, with president Eng Aik Meng leaving on Sept 1. He will be replaced by the current president for APL North Asia, Mr Kenneth Glenn.

NOL shares closed down three cents at $1.68 yesterday, the lowest level since last February.

(Not Vested)

not forgetting the new CEO is a former army general

NOL signs letters of intent to build 12 new ships

Ten 14,000-TEU vessels will be its largest and most efficient

http://info.sgx.com/webcoranncatth.nsf/V...F0031A9A9/$file/Press_Release-NOL_signs_LOI_to_build_12newships_15June2011.pdf?openelement [SGX Announcement]

Plenty of container liners are ordering mega ships from shipyards with deliveries in 2013 - 2015. The over-capacity of the shipping sector impacted the container industry least as compared to the dry bulk and product tanker sector. The latter two ordered a huge number of capesize and VLOCs to be delivered in 2011 - 2013 during the boom years. This has depressed freight rates despite growing demands. I hope shipping liners know what they are doing...

(Not Vested)

(15-06-2011, 05:27 PM)Nick Wrote: NOL signs letters of intent to build 12 new ships

Ten 14,000-TEU vessels will be its largest and most efficient

http://info.sgx.com/webcoranncatth.nsf/V...F0031A9A9/$file/Press_Release-NOL_signs_LOI_to_build_12newships_15June2011.pdf?openelement [SGX Announcement]

Plenty of container liners are ordering mega ships from shipyards with deliveries in 2013 - 2015. The over-capacity of the shipping sector impacted the container industry least as compared to the dry bulk and product tanker sector. The latter two ordered a huge number of capesize and VLOCs to be delivered in 2011 - 2013 during the boom years. This has depressed freight rates despite growing demands. I hope shipping liners know what they are doing...

(Not Vested)

If there is no demand, the CEO can pass it to RSN to convert it to landing ships or aircraft carrier.

(15-06-2011, 05:30 PM)yeokiwi Wrote:

(15-06-2011, 05:27 PM)Nick Wrote: NOL signs letters of intent to build 12 new ships

Ten 14,000-TEU vessels will be its largest and most efficient

http://info.sgx.com/webcoranncatth.nsf/V...F0031A9A9/$file/Press_Release-NOL_signs_LOI_to_build_12newships_15June2011.pdf?openelement [SGX Announcement]

Plenty of container liners are ordering mega ships from shipyards with deliveries in 2013 - 2015. The over-capacity of the shipping sector impacted the container industry least as compared to the dry bulk and product tanker sector. The latter two ordered a huge number of capesize and VLOCs to be delivered in 2011 - 2013 during the boom years. This has depressed freight rates despite growing demands. I hope shipping liners know what they are doing...

(Not Vested)

If there is no demand, the CEO can pass it to RSN to convert it to landing ships or aircraft carrier.

Buy ST Engineering haha ?

More capex!

Business Times - 16 Jun 2011

NOL orders new ships and upgrades worth US$1.54b

Ten of the vessels will be 14,000 TEUs, its largest and most fuel efficient

By JOYCE HOOI

CONFIRMING talk of a big shipbuilding deal, Neptune Orient Lines (NOL) has signed a letter of intent to build 12 new container ships in South Korea - 10 of which will be its largest ones ever. It will also be making the ships that it ordered last year even larger, which together with the new ships will cost about US$1.54 billion.

Of the 12 new ships, the largest ones - ten 14,000-twenty foot-equivalent unit (TEU) vessels - will be built at Hyundai Samho Heavy Industries Co.

Before this, the largest ships ordered by NOL were in the 10,000-TEU range, slated to be delivered in mid-December this year. The largest ships in its fleet currently are in the 8,000-TEU range.

The 14,000-TEU ships will be NOL's most fuel-efficient ships and will be used for its Asia-Europe trade, according to the group.

The remaining two 9,200-TEU ships being ordered will be built at Daewoo Shipbuilding & Marine Engineering Co, NOL said in a statement released on the Singapore Exchange after the market closed yesterday.

The 9,200-TEU vessels are 'likely be employed in the Trans-Pacific trade', according to NOL.

NOL's share price hit an 18-month low yesterday, falling 8 cents - or 4.97 per cent - to $1.53 as the sixth-most heavily traded stock on the Singapore Exchange.

On top of the new ship orders, NOL also said that it will be making 10 of the ships that it had ordered from Daewoo last year even larger - upsizing them from 8,400 TEUs to 9,200 TEUs. NOL said these upgraded ships will also have a new and more efficient design and technology.

Both the new and upgraded ships are scheduled for delivery in 2013 and 2014.

NOL is buying new and larger ships to 'reduce unit capital and operating costs, meet future growth needs and replace older and smaller chartered vessels that will be returned to their owners in the charter market'.

Last week, NOL said that it would issue $300 million in euro medium term notes to partially finance the buying of new container ships.

The notes - which bear an interest of 4.4 per cent - will be due in 2021 under NOL's US$1.5 billion euro medium term note programme that it had set up last year.

(Not Vested)

Business Times - 17 Jun 2011

NOL switches gears with big-ship buy

With its latest order, it looks set to make some play for Asia-Europe trade

By JOYCE HOOI

NOL Group's move to catch up with the big-ship boys with its latest ship order might be part of a change in strategy, according to those watching the company.

With the group's order of ten 14,000-TEU (twenty foot equivalent-unit) ships announced on Wednesday - the largest ships it has ever ordered - NOL looks set to make some play for the Asia-Europe trade.

The larger liners that have already entrenched themselves in the Asia-Europe trade, however, could pose a challenge to NOL.

'The bigger players on the Asia-Europe trade like Maersk, MSC, CMA-CGM and CSCL have already deployed or ordered ships of this size/class, and NOL would find it hard to compete effectively on this route without the cost advantages obtained from running these bigger and more efficient ships,' said Suvro Sarkar, a DBS Group Research analyst, in his report yesterday.

'The more aggressive intent to protect market share on Asia-Europe routes, where NOL has traditionally not been seen as a strong player, could be a sign of change in strategy as NOL has seen some recent changes in top management, including changes in group CEO and the president of the container shipping division (APL).'

The last two months have seen three major changes in the executive line-up at APL - the group's liner arm. It had started with the announcement of the retirement of its group CEO Ron Widdows, the resignation of the head of Trans-Pacific trade and recently, the surprise resignation of Eng Aik Meng, APL's president.

On Wednesday, the group had said it would order 10 of the 14,000-TEU ships and two 9,200-TEU ships, which - according to Mr Sarkar's estimates - cost about US$130 million and US$100 million each, respectively.

Some upgrades to an existing order for 10 ships placed last year, in which the ships will now be bigger at 9,200 TEUs instead of 8,400 TEUs, will cost about US$5 million each, Mr Sarkar reckoned.

NOL had said that the total package of new orders and upgrades would cost US$1.54 billion but had not provided a breakdown of the cost.

The group's counter price fell to an 18-month low on Wednesday to $1.53 and stayed there yesterday, closing unchanged despite high trading volumes and a regional market fall.

Mr Sarkar, who maintained his 'hold' rating on the stock but sees 'potential downside risks to our earnings assumptions for FY 2011/2012', expects the second quarter to be another loss-making one for NOL.

A Nomura International report earlier this week, while neutral on NOL, had downgraded the Asian container shipping sector to a 'bearish' rating, with the expectation that the year overall will be loss-making.

'Supply is the main culprit, as we believe container lines are focused more on vessel load factors than on freight rates and profitability. For example, container lines are reporting load factors of over 90 per cent but lower freight rates,' the Nomura report said.

Noticed that Maersk ordered more mega container vessels today. YZJ also clinched mega container vessel deal last week from Peter Dohle. Is the container industry currently at where the dry bulk industry was in 2006/07 with massive capesize order-book ? But then again, back then the dry bulk freight rates were exceptionally high yet the container industry freight rates has barely recovered so what is driving this major capacity building exercise ? How will this impact the likes of ship leasing firms with smaller container vessels since operators intend to switch to mega ships ?

I think the Edge magazine this week did a write up to explain NOL reason to purchase new ships: Cheap financing, replacing ships that are chartered with the new ships if demand does not picks up and maintain market share.

But true enough, anyone know how to short these companies? haha. I would be keen to explore mid term (2-3 years) put options on container shipping companies.

nowadays, shipping liners are difficult to make big profit.

unlike the good old days, when most shipping liners were private. anyhow can earn big profit.