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CSCL seeks US$300m loan to pay for fleet expansion

China's No1 cargo carrier has four ships on order and plans 18pc box increase

China Shipping Container Lines (CSCL), the mainland's largest sea cargo carrier, is seeking a US$300 million loan to buy new vessels and containers.

Syndication of the loan might prove tricky given its six-year term against an eight-year lease for the containers, bankers said.

Most syndicated loans cover a three-year period and generally top out at five years, which is as far as lenders are generally willing to look at a borrower's ability to service debt.

The loan will cost CSCL 42 basis points above the London interbank offered rate in interest. Citigroup has been hired as the arranger.

The company ordered four new ships in January for US$231 million and plans to buy 13,500 new 20-foot container boxes for an additional US$19 million. It plans to take on 64,000 new containers, an 18 per cent increase in capacity, this year at a cost of two billion yuan.

The ships, the first of which will be delivered in 2008, have a capacity of 4,250 boxes and will be paid for in five US$46 million instalments. The last ship will be delivered in 2009, according to CSCL.

About 70 per cent of the purchase price of the ships or US$162 million would be paid for by bank borrowings that would be 'finalised in the near future', the company said in January.

The company has three outstanding loans maturing over the next seven years totalling US$122 million, according to Bloomberg data. ING arranged a relatively small eight-year, US$22 million loan last year. ING funded more than two-thirds of the loan while DnB NOR, Norway's largest bank, provided the rest.

CSCL took on three new ships in the first quarter, increasing capacity to 352,000 20-foot boxes. It now operates 120 vessels and is the sixth-largest container line operator in the world.

Global shipping rates are expected to head down for the first time in five years as the number of new ships coming into service is likely to outpace the growing demand for cargo space.

Global cargo capacity is expected to grow by at least 50 per cent over the next three years, according to Dresdner Kleinwort Wasserstein.

Rising fuel prices are also a problem for the shipping industry. CSCL paid US$254 per tonne of fuel, up 38 per cent last year compared with 2004, the company said last month.

A US$715 million MGM Paradise loan was likely to be signed next month, bankers said.

The five and seven-year loan, which started out last year at US$600 million, will cost the company 250 basis points above Libor. Bank of America and HSBC are among the arranging banks.

The loan is attracting banks, such as a US$4 million contribution from Calyon Corporate and Investment Bank, which had previously opted out of casino lending, after finally convincing reluctant home offices to contribute funds to the Macau gaming boom.

Funds will go towards the construction of the US$1 billion MGM Grand Macau hotel and casino. The project, to be completed in the second half of next year, will include a 600-room hotel, 345 gaming tables and 1,000 slot machines.

The development is a 50-50 joint venture with Las Vegas' MGM Mirage and Pansy Ho Chiu-king.

Loan ballast

CSCL has three outstanding loans totalling US$122 million

The US$300 million loan will be for a six-year term

CSCL operates 120 vessels as the world's No6 container line

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