COSCO to receive massive $26b loan from China Development Bank

The agreement, which will infuse $26 billion into the state-run ocean shipping conglomerate over the next five years, will serve China’s “One Belt, One Road” strategy, according to a statement from China COSCO Shipping.    China Development Bank has pledged to provide China COSCO Shipping Corp. with 180 billion yuan (U.S. $26 billion) in financing in the years through 2021, according to a statement from the company.
   COSCO did not provide details on the deal other than to say it would be provided through various financial products.
   Reuters reported the state-run ocean shipping conglomerate said the agreement “was to serve China’s ‘One Belt, One Road’ strategy and efforts to deepen state-owned enterprise reform.”
   COSCO merged with China Shipping last February and is now the fourth largest container shipping company by capacity, operating a fleet of 292 owned and chartered ships with more than 1.6 million TEUs of capacity, according to Alphaliner.
   The company said the deal would “serve the national strategy of ‘all the way along the way,’ ‘marine power’ and ‘manufacturing power,’ and ‘deepening reform of state-owned enterprises.'”
   But COSCO is a vast conglomerate involved in many different segments of the shipping business, and it is not clear how the capital will be deployed.
   The website for China COSCO Shipping Corp. Ltd., where the deal was announced says, “The total fleet of China COSCO Shipping comprises of 1,114 vessels with a capacity of 85.32 million DWT, ranking No.1 in the world.”
   In addition to its container fleet, its self-owned dry bulk fleet includes 365 vessels with 33.52 million DWT capacity and a fleet of 120 tankers with 17.85 million DWT capacity. It also has a general cargo and specialized cargo fleet with 3 million DWT capacity.
   The company owns over 46 container terminals all over the world, with over 190 berthing spaces and it says throughput of its container terminals worldwide amounts to 90 million TEUs, taking the second place in the world. It says it leases 2.7 million TEUs of containers and also has an offshore engineering manufacturing and vessel agency business.
   To get some perspective on the size of the deal, American Shipper reached out to Jim Lawrence, the chairman of Marine Money, who noted, “From Dealogic we note that of the top 15 syndicated shipping loans for 2016, only eight were for more than a billion dollars.” He also said a deal for Norwegian Cruise Line took top billing at $2.25 billion.
   “The COSCO deal needs to be looked at on the scale of a national infrastructure style transaction,” he explained, noting only governments really borrow such huge sums.
   The One Belt One Road initiative should be looked at in the same way as the U.S. initiative in the 1960s to put a man on the moon, he said. “It is a massive vision for expanding trade, improving the lives of billions and, of course, putting China and its shipping fleet squarely in the middle,” he said. “Hugely exciting and obviously expensive!”