FSL – BT

FSL Trust sees steady revenue with long leases

CHARTER lease provider First Ship Lease (FSL) Trust said yesterday that investors have little cause for worry as its charter leases are long-term, which should result in steady revenue. But it plans to scale back acquisitions as the shipping industry navigates choppy waters.

‘While shipping cycles do affect our lessors, our strength is that our charters are long-term and fixed,’ said CFO Cheong Chee Tham. ‘We give investors exposure to the maritime industry with reduced risk.’ Lessors with strong credit ratings will be able to ride through the current storm, he said.

FSL Trust has a portfolio of 23 vessels that are leased out on for terms of at least seven years. The earliest expiry for one of its contracts is 2014. FSL also highlighted that as at Sept 30, it had no loan maturity for three years.

The trust is also unlikely to make any acquisitions between now and mid-2009, and plans to focus on sustaining its distribution per unit (DPU). DPU for the third quarter ended Sept 30 was 3.05 US cents. DPU guidance for Q4 is 3.08 US cents, revised down from 3.11 US cents earlier this month. This is because FSL Trust’s lending banks invoked a ‘market disruption clause’ in loan terms, which has led to higher interest charges.

FSL Trust is ‘optimistic’ its banks will not invoke this clause again when interest rates are reset around end-December and early January, since the gap between interbank funding and the London Interbank Offer Rate (Libor) has narrowed. DPU guidance for Q1 2009 is now 3.17 US cents. Unitholders will be paid the Q3 2008 DPU on Nov 28. Q3 revenue grew 84.8 per cent to US$23.69 million, while net distributable income was 42.2 per cent higher at US$15.8 million, of which US$551,000 was payable as an incentive fee to the trustee-manager.

FSL Trust’s unit price closed five cents higher at 48 Singapore cents yesterday.