First Ship Lease Trust

Attended the AGM. Below were some observations.

Mgmt Key concern is now the financing of the syndicated loans. With the upcoming financing of the 2 chemical tankers, FSL's mgmt mentioned it will be able to fully refinance the syndicated loan, after the successful refinancing, the new FSL mgmt will then present their long term plans. 

Judging from the latest quarter results, it seems the refinancing is likely to go through because current debts stand at US$120 mil and with $97 mil refinancing ready and $10 mil in cash, FSL just needs $13 million to be raised from its 2 chemical tankers (market value about US$20 mil total).

Tiger Investment- Tiger Investment was recently declared as a substantial holder. They also sent a rep for the AGM to voice their concerns over the convertible bonds of 7%. FSL mgmt replied the convertible bond had to be done because of time constraints and current syndicated loan banks were fighting for liquidation of the vessels to recover the principal. IMO, getting 7% convertible interest loan is fair considering that FSL's secured lending is already at 5.2%. It was also mentioned Tiger had been calling the current board voicing their concern over the convertible bonds. Pherhaps we might be seeing another activist member appearing.

New Term Loans- While mgmt were not able to disclose the interest of the new term loans, they mentioned during Tea that the interest margin is similar to the syndicated loan deal (5.2%)

" Pherhaps we might be seeing another activist member appearing"

Activist holding bonds are bad for equity shareholders...no need to guess where
their value coming from...hahahah....

(11-05-2018, 11:23 AM)opmi Wrote: " Pherhaps we might be seeing another activist member appearing"

Activist holding bonds are bad for equity shareholders...no need to guess where
their value coming from...hahahah....

I thought Tiger is equity shareholder. Or am I wrong?

Tiger is an equity holder.

VGO is the fund who is planning to subscribe to the convertible bond. In my view, the interest terms is fair at 7%; but the conversion rate of 7,4 SG cents is a tad too low. If FSL refinances the US$120 Mil debt successfully, we are looking at net cash flow of possibly $0.12 cents total until 2023. For VGO, it is very high returns on top of a 7% interest

Proposed Issue of US$7,250,000 In Aggregate Principal Amount of Redeemable 7% Convertible Bonds
FSL Trust Management Pte. Ltd. (as trustee-manager of First Ship Lease Trust) announced that the Bond Issue was completed on 21 May 2018, pursuant to which an aggregate of US$7,250,000 Bonds have been issued to the Subscriber in accordance with the Bond Subscription Agreement and the Terms and Conditions. 

Proposed Scheme of Arrangement
FSL Trust Management Pte. Ltd. (as trustee-manager of First Ship Lease Trust)  announced that on 21 May 2018, on the application of FSL Trust Management Pte. Ltd., the High Court granted an extension of time to 29 June 2018 for the Company to convene a meeting of Lenders for the purpose of considering and, if thought fit, approving with or without modification (which modification may be made any time prior to or at the Court Meeting) a Scheme of Arrangement proposed to be made between the Company and its Lenders pursuant to Section 210 of the Companies Act. 

Refinancing of Chemical Tankers
FSL Trust Management Pte. Ltd. (as trustee-manager of First Ship Lease Trust) announced that the Trust has on 17 May 2018 accepted an offer letter issued by a bank in relation to a senior secured amortizing term loan of up to US$18,000,000 for the refinancing of the Chemical Tankers. The offer is subject to, amongst others, entry by the parties into definitive transaction documentation.

More detals in http://infopub.sgx.com/FileOpen/FSL%20-%...eID=506977

http://infopub.sgx.com/FileOpen/FSL%20-%...eID=507358

FSL has used the proceeds raised from the convertible bonds to pay down debts. As of today, debts stands at US $110 Million.

Given that FSL has secured three loan deals totaling US$108 million and has cash reserves of about US $6 million, the trust is likely to continue as a going concern. All they have to do now is ride out the storm. Cash flow wise the company is still earning approximately US$10mil per quarter of cashflow. From this trajectory and assuming 6% effective interest, the trust will pay down its loans by 2022.

Does this signal potential vessel acquisitions in the works?


The Board of Directors of FSL Trust Management Pte. Ltd. (as trustee-manager of First Ship Lease
Trust (the “Trustee-Manager”) wishes to announce that the Trustee-Manager has registered a whollyowned
subsidiary, FSL 9 & 10 Holding Ltd (“NewCo”) in Cyprus.
The issued and paid-up share capital of NewCo is Euro 1,000 represented by 1,000 shares. The
principal activities of the NewCo are shipping and ship ownership, including the arrangement of finance
to support such activities.

http://infopub.sgx.com/FileOpen/Ann%20Cy...eID=510661

Refinancing Loan Agreements

First Ship Lease Trust announced that it has through its various subsidiaries signed the following loan agreements:
(a) US$50 million facility agreement with Hellenic Bank Public Company Limited;
(b) US$40 million facility agreement with Chailease International Financial Services Co., Ltd.; and
© US$18 million facility agreement with Amsterdam Trade Bank N.V..
(collectively, the "New Facilities").

The purpose of the New Facilities is to refinance the current existing outstanding syndicated loan of approximately US$109.94 million. Any balance unfunded outstanding to be paid by the Trust out of its internal resources. The New Facilities will be available for drawdown after fulfilment of the respective conditions for their utilizations.

http://infopub.sgx.com/FileOpen/20180802...eID=518848

FSL has announced its Q2 results, overall its pretty decent. revenue across all tanker segments are still declining. Coming this quarter, financing cost will reduce thanks to no longer the imposition of an extra 2% of interest

It seems the trust will continue to coast through, especially with the refinancing of its loans.

http://infopub.sgx.com/FileOpen/20181101...eID=532172

Q3 results are out and revenue is still falling due to the TORM vessels.

What I noticed though is that the weighted average of the loans are 4% + LIBOR rates instead of the old loans of 2.8% + LIBOR, see page 5. It seems FSL does really find it tough to borrow money in the current climate. This makes the 7% convertible bond looks cheaper. The current LIBOR rates is already 2.5%. So effectively their loans are about 6.6% interest. It will definitely impact my valuation of FSL as I have to redo under the assumption of 7-8% interest instead of 5% environment which I had previously targetted.

In addition, looking at the cash flow front, I noticed it is no longer any amortizing loan but it seems to be only an interest only loan because FSL only paid 1 million on its 104 Million Loan for this quarter.