Seaspan orders eight 8,500-TEU ships, increases borrowing limit
Seaspan Corp. has ordered eight 8,500-TEU vessels from Hyundai Heavy Industries in South Korea that will be chartered out to COSCO Container Lines.
The vessels are scheduled to be delivered between the fourth quarter of 2009 and the fourth quarter of 2010. The total delivered cost is expected to be about $132.5 million per vessel. COSCO will pay $42,900 per vessel per day over the period of the 12-year charter agreements for each of the ships. Thereafter it will have three consecutive one-year options to charter each of the ships for $43,400 per vessel per day.
COSCO said it will deploy the ships in the east/west trunk services “to enhance the competition ability and provide better service to the clients.”
Seaspan said that each new vessel is expected to contribute $13.2 million to $13.6 million in incremental EBITDA (net earnings before interest, undrawn credit facility fees, taxes, depreciation and amortization of deferred financing fees) per annum upon delivery.
“The acquisition of these new ships will bring our total fleet to 55 vessels and add over $100 million in annual EBITDA once all eight vessels are delivered and operating. We believe this investment demonstrates the power of our business model to finance large scale vessel acquisitions to meet the needs of the top operators in the liner industry,” said Gerry Wang, Seaspan’s chief executive officer.
Meanwhile, New York Stock Exchange-listed Seaspan has increased its borrowing limit from $1 billion to $1.3 billion after it amended its credit facility originally entered into at the time of its initial public offering in August 2005.
Seaspan has pledged the 23 vessels in its initial contracted fleet plus the four vessels purchased from A.P. Moller-Maersk in 2006 as collateral for this facility. Until Aug. 11, 2012, the company will be able to borrow up to $1.3 billion without adding additional collateral provided that the total outstanding balance remains below 70 percent of the fair market value of the 27 vessels in the initial security package. Beginning on Aug. 11, 2012, the borrowing limit will be reduced by $32.5 million per quarter until May 11, 2014, when the outstanding loan balance will be due and payable.
“The amendment and restatement of this credit facility significantly enhances our ability to opportunistically grow our fleet and manage our capital structure,” Wang said. “Our calculations show that we will have quick access to over $550 million beyond what is needed to finance the 27 vessels in the initial collateral package. This will give us a substantial competitive advantage as we pursue acquisitions going forward.”