PST – BT

Pacific Shipping to buy US$200m of ships a year

(SINGAPORE) Singapore’s Pacific Shipping Trust is in advanced negotiations to buy several ships and plans to add US$200 million worth of ships yearly to its current portfolio of eight container vessels, its CEO told Reuters yesterday.

Pacific Shipping, which has a market cap of US$148 million, is also looking at diversifying its fleet and is particularly interested in bulk carriers, which are currently enjoying ‘exceptionally’ good charter rates.

‘Before the stock markets crashed, there was a tremendous amount of liquidity chasing ships, driving up prices to a point where the corresponding charter rates did not make sense anymore,’ Pacific Shipping chief executive officer Subhangshu Dutt told Reuters in an interview.

Liquidity-rich private equity firms such as Seacastle, linked to the US-listed Fortress Investment Group, and Bear Stearns Merchant Banking have bought up vessels and shipping lines this year, but Mr Dutt said the ‘buying frenzy’ has since died down. ‘Now at least we can sit down and discuss, and prices are no longer a moving target,’ he said.

Mr Dutt said two new container ships that the trust acquired this month for US$136 million will be funded by bank loans, as the ongoing global credit crunch sparked by the US sub-prime crisis has not impacted the shipping sector.

‘The perception for shipping has not changed, which is that it’s backed by solid fundamentals and assets,’ he said, adding that charter rates for container ships should continue rising for the rest of the year, until a seasonal slowdown in early 2008.

Mr Dutt said Pacific Shipping has no need to issue new shares in the trust until 2009, after the two new ships are delivered. ‘Only then will we have the revenue stream to match the new equity. Otherwise we will end up diluting the yield,’ Mr Dutt pointed out.

Pacific Shipping was listed in May 2006 and was the first of three shipping trusts to trade on the Singapore Exchange.

First Ship Lease and Rickmers Maritime Trust have market caps of US$425 million and US$342 million.

Of the three shipping trusts, Pacific Shipping is the only one whose stock is trading at above its IPO price, though Mr Dutt said the trust’s stock price and trading volumes are still ‘below expectations’.

‘We had hoped to see an increase in price and trading volumes with the two new trusts coming in, but we haven’t seen that happening,’ Mr Dutt noted. ‘We’ll need more time and effort to help investors understand the benefits of shipping trusts.’ – Reuters