FSL – BT

FSL Trust holding back US$200m notes issue

It says Dubai World fallout impacted fixed-income investor sentiment

FIRST Ship Lease Trust (FSLT) has put plans to issue up to US$200 million senior notes on hold amid poor investor sentiment in the wake of the Dubai World credit crisis.

FSLT had said, when it announced the notes issue last month, that the proceeds would be used to repay existing indebtedness, fund future vessel acquisitions and for its general corporate purposes.

However CEO of trustee-manager FSL Trust Management, Philip Clausius, yesterday said: ‘The start of the investor roadshow coincided with the outbreak of the Dubai World credit crisis. This impacted fixed-income investor sentiment, particularly in Asia and Europe.’

‘We could most likely have concluded this offering, but only on terms that would not have been in the best interests of FSLT unitholders. Since we have no external pressure, including that from our bank lenders, to conclude this offering, we have decided to suspend it for now. We will revisit it when market circumstances change,’ he added.

In its SGX statement, FSLT said that it has stable and predictable cashflow from its portfolio of long-term lease contracts, which has remaining contracted revenue of US$782 million as at Sept 30 this year. It does not have any outstanding capital expenditure that requires additional funding and it has no loan maturing before April 2, 2012.

A share placement in September raised some US$28.3 million for FSLT and the shipping trust at its third quarter results had said that it was evaluating a number of attractive acquisition-and-leaseback proposals which would enable the trust to further diversify its portfolio by investing in modern vessels with good quality counterparties.

The extra US$200 million would have come in handy to pre-pay loans and improve its cash position as well as take advantage of buying opportunities. However, these are not absolutely critical to FSLT’s business as it does not have newbuilds on order.

Another shipping trust, Rickmers Maritime Trust, however may be concerned over this development as it does have serious fund raising needs in the near future. With this being the first fallout in the local shipping finance sector directly blamed on the Dubai woes, some will wonder whether there are more lurking in the shadows.