FSL – BT

FSL renegotiates terms for TORM product tankers

FIRST Ship Lease Trust (FSL Trust) has renegotiated charter terms for two product tankers, TORM Margrethe and TORM Marie, which were leased to a wholly owned subsidiary of Denmark’s TORM.

The new terms state that the bareboat charter rates for the two vessels will be realigned to the variable rates TORM achieves in the market. In exchange for the rate concessions, FSL will be allocated equity in TORM, FSL said.

The original bareboat agreements also had early buyout, purchase and lease extension options, but these will be cancelled under the new terms.

In addition, should the actual rates achieved by TORM for the vessels underperform the market benchmark by a pre-agreed, semi-annually tested margin, FSL will have the right to terminate the charters.

TORM said earlier this month that the company had reached a conditional agreement with the coordination committee of its banks regarding a deferral of instalments and a covenant standstill on its ship financing until the end of this month.

Due to the carrier’s current financial difficulties, it had also been in talks with its time charter partners to provide a long-term financing solution to its problems by amending its charter-in agreements.

Despite the amended terms, FSL said assured investors that it did not expect any material impact on the net tangible assets per unit of the trust for the current financial year.

The new terms are subject to consent from FSL’s lenders. ‘While some lenders have already given their consent, formal approval is still pending,’ said FSL.

Units in the trust closed 0.5 cent up at 22 cents yesterday.

Posted in FSL

Shipping – BT

Fewer box ships lying idle but supply set to increase

Overcapacity still not addressed by owners, operators

The inactive containership fleet has fallen for the first time since August 2011, driven by carriers which are readying themselves for the busy peak summer months ahead.

However, optimists who think it may signal the turning of a tide towards a better match between supply of ships and demand for cargo – and therefore herding shipping lines back to profitability – think again.

On the one hand, data from Alphaliner shows that the idle boxship fleet as of Mar 26 declined about 75,000 twenty-foot equivalent units (TEUs) over two weeks. The mothballed fleet of container vessels now stands at 5.3 per cent of global capacity or 838,000 TEUs, down from 5.8 per cent or 913,000 TEUs.

The reductions have all come from container lines putting back their idled ships into service to handle more cargo demand in the summer, whereas non-operator owned idle ships have stagnated at 397,000 TEUs.

Notably, carriers have decided to yank larger vessels out of lay-up. The number of idled vessels capable of carrying 7,500 TEUs or more have dropped to 12 units from 18.

‘Freight rates are about demand and supply. Re-introducing idle capacity will increase the supply which weakens the utilization. This will affect the rates negatively,’ said Jason Chiang, senior manager at Drewry Maritime (Asia).

Moreover, Drewry Maritime Research said that idled container tonnage remains relatively low and the overcapacity situation is still underaddressed by ship owners and operators today.

During the throes of the global financial crisis in 2009, about 12 per cent of the global box ship fleet were made inactive.

‘Until the inherent structural capacity is truly tackled, we will continue to have periodic and violent bouts of overcapacity that will keep rates and operating margins yo-yoing up and down,’ said Neil Dekker, head of Drewry’s container research.

There is a lot more room yet for more lay-ups.

In 2012, 59 ‘large’ container vessels of over 10,000 TEUs capacity will be entering the global fleet. It is almost for sure they will be deployed on the already overcrowded Asia-Europe long-haul trades, which Credit Suisse estimates to have about 330,000 TEUs worth of capacity a week.

Said Mr Chiang: ‘The liners’ hands may be forced to their last option of idling. Another 7.4 per cent of supply will be added to the system, the simple answer is that a similar amount of existing capacity should be idled to allow for the introduction of new capacity.’