First Ship Lease Trust

[Musicwhiz]

The Trust has called for a trading halt this morning. Are there plans to raise funds?

(Not Vested)

[iff]

I don't think so, on the contrary,
I think this could be some good news regard the 2 returned ships's redeployments.
Anyway I will not be interested to take any stake in this counter

(not vested)

[Musicwhiz]

I don't think so, on the contrary,
I think this could be some good news regard the 2 returned ships's redeployments.
Anyway I will not be interested to take any stake in this counter

(not vested)

News was already out an hour ago. :p

Brief info:
They are acquiring another vessel on 7-year lease.

Fund raising - 57 million new shares price yet to be determined but it's a discount to last traded price of 37 cents.

[MattAtelier]

Looks like they are raising funds to purchase 1 vessel. US$46mn purchase of 1 vessel, 50% funded by debt, remainder in cash and the US$15mn equity raise. The company clams its cash flow accretive after acquisition.

http://fsltrust.listedcompany.com/news.html/id/256540

[iff]

it's share placement...
they don't even bother do sth to boost the share price before placing new shares

i'm afraid mr mkt may become negative abt this

[Nick]

It originally had $50 million cash of which it used US$23 million backed by US$23 million debt to purchase a 2006 built product tanker vessel which would generate US$4.7 million lease revenue annually. Since this is a bareboat charter, I cannot compare the return with the latest acquisitions from PST. Assuming 6% interest rates on the loans (1.4 mil) and management fees of US$0.2 mil and loan amortization of US$2 mil a year, the Trust would only generate positive cash in-flow of US$1.1 mil annually. Since the other vessels have similar contract terms albeit lower revenue, I would estimate cash-inflow of US$2.2 mil. This assumes that the Management retains cash-flow from depreciation to repay loans (which isn't an official FSLT policy). The potential new DPU might be = (US$5.7 X 4+ US$2.2) mil / 655.6 mil units = 0.953 US cents per quarter.

It looks yield accretive so perhaps it is not entirely a bad deal despite the diilution. Perhaps, unit-holders can take heart that with FSLT lenders allowing FSL to draw down loans from its existing credit, refinancing of the loans shouldn't run into major problems near term. FSLT VTL waiver ended a few days ago so it would have lower interest rates compared to the previous 2 years.

Personally, while the numbers looks good, the deal overall is a poor move. The Management should have used the cash raised in the previous placement to repay corporate loans or repurchase units which would have boosted its DPU. If the Management used US$30 million to repurchase all of its units in 2010 at US$0.40 per unit, it could have cancelled 75 million units thereby reducing the outstanding unit float to 523.7 million units which would raise distribution to 1.08 US cents without additional loans ! Let's see how the Market view the latest transactions. We must also wait for the 2Q 2011 results to see whether will the Trust continue to maintain its US$8 million a quarter loan repayment in June 2011 onwards or will it reduce it to boost the DPU further ?

Torm 1Q Results: http://www.torm.com/wps/wcm/connect/ef0b...OD=AJPERES

(Not Vested in Shipping Trust)

Disclaimer: My calculations might be inaccurate. Do not blindly follow my projected DPU or thoughts expressed above in making a buy/sell decision.

[Nick]

FSLT has completed their book building for the placement and has lifted the trading halt.

http://info.sgx.com/webcoranncatth.nsf/V...A0035CE07/$file/Pricing_Announcement_9_June_2011.pdf?openelement [SGX Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...A0035CE07/$file/News_Release_Placement_9_June_2011.pdf?openelement [Press Release]

The Trust will maintain its DPU of 0.95 US cents for 2Q 2011. The Management did not provide a DPU guidance for 3Q 2011 onwards but will do so upon completion of the acquisition. I earlier estimated a DPU of 0.953 US cents with the Trust repaying US$8.5 million worth of corporate loans quarterly. It could be much higher or much lower - we can examine the figures when it is released. On another note, the latest M&A with debt portion being financed from existing credit lines and the VTL ratio safely above 145% (the latest acquisition VTL is 200%), refinancing should be a success (barring any unforeseen events). Personally, while FSLT may have a high yield, its counter-parties (with the exception of Evergreen, Yang Ming and Berlian Laju) are not well-known to most local investors.

(Not Vested in any Shipping Trust or Operators)

[Musicwhiz]

Business Times - 10 Jun 2011

FSLT raises $20m in private placement for tanker

By JOYCE HOOI

IN a bid to grow its cashflow and boost liquidity, First Ship Lease Trust (FSLT) has raised S$20 million - or US$16.3 million - from a private placement of 56 million new units, it announced yesterday.

The net proceeds of about US$15 million will go towards paying for its second US$46 million long- range II product tanker that it announced it would be buying yesterday.

At 35 cents apiece, the new units are at a discount of about 6.4 per cent to a unit price of 37.4 cents - which is the adjusted volume weighted average price of the trades made for the full market day, the day before the placement agreement was signed. Against the counter's last traded price of 38.5 cents before trading was halted yesterday, this is a discount of 9.1 per cent.

The purchase of the product tanker that this placement will be funding - the MT Torm Marie - is the second one to be announced within the span of a week. Last week, the acquisition of a similar-sized product tanker - the MT Torm Margrethe - was announced.

Both vessels are part of a leaseback arrangement with Torm Singapore Pte Ltd, a local unit of the Danish Torm A/S. The seven- year charter of the second tanker, MT Torm Marie, will bring the trust's remaining contracted revenue to US$635 million, excluding extension options.

'Both transactions are net cashflow accretive on a per-unit basis, which means that the existing shareholders do not have to worry about a dilution or a lowering of the distribution which we intend to pay going forward,' said Philip Clausius, president and chief executive officer of FSLT's trustee manager.

These units are expected to be issued on June 23 and listed the day after, making up about 8.6 per cent of the enlarged unit base.

For existing unitholders, a stub distribution has been declared for the period starting April 1, up until the day before the new units are issued, instead of until June 30. The estimated distribution for this period is 0.87 US cent per unit.

The next distribution is expected to be for the period from the day the new units are issued until June 30, which is estimated to be 0.08 US cent per unit. Quarterly distributions are expected to resume after that.

The purchase of the two vessels - the first vessel acquisition moves since the fourth quarter of 2008 - points to FSLT's return to the 'growth track', according to Mr Clausius.

The trust has traded thinly since it was listed in 2007, and Mr Clausius is hoping that this placement will inject some much needed liquidity into the stock.

'Trading liquidity of shipping trusts has been very poor, and it is very important that we get the liquidity up. By issuing some fresh stock, we have a much better chance of getting the liquidity up to levels where investors and analysts take an interest in us,' he said yesterday.

'Clearly, the unit price is not satisfactory today but we do believe that, over time, investors will rediscover the value that FSL Trust offers in terms of the yield and growth prospects.'

(Not Vested)

[Nick]

FSLT released some materials regarding the latest transactions.

Factsheet: http://fsltrust.listedcompany.com/misc/F...tJun11.pdf

Presentation Slides: http://fsltrust.listedcompany.com/misc/F...June11.pdf

The latest corporate actions highlights how bad the product tanker segment market is compared to the previous decade.

In Nov 2007, FSLT bought 2 product tankers with 47,000 DWT capacity for US$113 million. I believe it is valued at US$81.7 million as of 1Q 2011.

In June 2011, FSLT bought 2 product tankers with 109,000 DWT capacity for US$92 million.

Big difference in valuation (and charter rates) !

On another note, FSLT unit price may have a better chance of appreciating if the Management reveals very clearly how they intend to maintain the Trust capital structure and how will the distributable income be funded accordingly. PST is the only one with a clear strategy here - retain cash-flow from depreciation to repay 10 year loans with no VTL covenants and retain 30% of remaining cash-flow for growth/rainy day. I am not too certain what is FSLT plans - 100% cash payout (since LTV waiver is over) and turn to equity to repay debt (didn't work out so well previously) or continue to repay loans as it has been in the past 2 years or go to bonds ? I guess we will know the plan soon - key signal will be whether they continue to repay US$8 million loans per quarter in 3Q 2011.

(Not Vested in any Shipping Coys)

[Musicwhiz]

Business Times - 21 Jul 2011

FSL Trust's DPU for Q2 unchanged at 0.95 US cents

By LYNN KAN

FIRST Ship Lease (FSL) Trust reported distribution per unit (DPU) of 0.95 US cents for its second quarter ended June 30, 2011 - unchanged from before.

Quarterly distribution was US$5.73 million, 0.8 per cent higher than US$5.69 million achieved a year ago. Net cash generated from operations was 21.8 per cent lower at US$13.5 million instead of US$17.3 million in Q2 FY10.

Revenue in Q2 was 0.6 per cent higher at US$28.7 million, from US$28.5 million last year. Contributing to better revenue was improved freight income for its two product tankers, FSL Hamburg and FSL Singapore, as well as the maiden contributions of two newly acquired vessels - with a price tag of US$92 million - leased to TORM.

FSL Trust managed to narrow net losses for the quarter by 92 per cent to US$491,000 from US$6.1 million in the year-ago period. If not for a financial provision of US$2.5 million, FSL Trust would have been in the black with US$2 million in profits.

The provision was due to an expected 'call on banker's guarantee' which it posted in favour of Daxin Petroleum, when its bunker claims against Rovina Shipping Company were heard in the Chinese courts. The court's judgment was for the sum of US$2.386 million, plus interest - less than Daxin's full claim amount of US$2.8 million.

President and CEO of trustee-manager FSL Trust Management, Philip Clausius, said: 'Steady earnings from our long-term bareboat charters, including the newly minted sale and leaseback deals with TORM, is testimony that the Trust is now back on course for growth.' FSL Trust's independent auditor KPMG issued a statement after reviewing the trust's condensed consolidated interim financial statements. It drew attention to US$229.9 million worth of financing arrangements, maturing on April 2, 2012, that were classified under 'current liabilities'.

FSL Trust Management said it was in 'advanced discussions with the lending banks to refinance loans' under its credit facility and details about the refinancing package should be finalised in the near term. KPMG said should the trust be unable to complete the refinancing plan for the US$229.9 million in arrangements, 'these conditions indicate the existence of a material uncertainty that may affect the group's ability to continue as a going concern'.

FSL Trust closed unchanged at 34.5 cents yesterday.