The $473m facility size will cover 85% of the VLOC construction cost of $556m over 12 years plus an option for a further three years, as well as early repayment option from the fourth year. Iron ore producer Fortescue will control the ships for the life of the facility, taking ownership on maturity or after early repayment.
Fortescue said the deal is the largest direct funding arrangement provided by a major Chinese financier for a non-Chinese company in Australia.
“This is a groundbreaking financing transaction which builds and broadens Fortescue’s highly valued relationships with China through our first direct funding arrangement with a major Chinese leasing company,” said Nev Power, ceo of Fortescue.
The VLOCs are currently under construction at China’s Jiangsu Yangzijiang and Guangzhou and CSSC Offshore & Marine Engineering Co (Comec) shipyards, with the first delivery scheduled for November this year and the balance of the ships through to mid-2018.
Fortescue pointed out that the VLOC fleet will improve load rates, efficiencies and reduce operating costs, and when fully operational will provide 12% of Fortescue’s shipping requirements.
In recent years, Chinese financial leasing institutions have attracted interests from international shipowners particularly at a time when traditional lending sources from banks have shrunk due to the shipping market slump.
Minsheng Financial Leasing Co, for example, is looking to enlarge the value of its ship financing deals by 10-15% in 2017 over this year. In the first nine months of 2016, Minsheng has approved five to six deals worth a combined $1.3-1.4bn.
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