China Shipping confirms 4b yuan bonds issue plan

PUBLISHED : Friday, 18 March, 2011, 12:00am
UPDATED : Friday, 18 March, 2011, 12:00am

China Shipping Development, one of the mainland's largest tanker and dry bulk cargo ship operators, confirmed it planned to issue convertible bonds to raise up to 3.85 billion yuan (HK$4.56 billion) later this year to finance the construction of 19 ships.

This came after chairman Li Shaode (pictured) announced net profit surged 61.2 per cent to 1.72 billion yuan last year, up from 1.07 billion yuan a year earlier. Turnover rose 29.3 per cent to 11.28 billion yuan compared with 8.73 billion yuan in 2009, which reflected a 14.2 per cent rise in shipment volumes of oil, coal and other dry bulk commodities.

Shareholders will vote on the bonds issue at an extraordinary general meeting on April 6. If approved, China Shipping Development will lodge the application with the China Securities Regulatory Commission in April. The shipping company is hoping the regulatory green light will be given for the bonds for them to be issued by the third quarter.

Li and chief financial officer Wang Kangtian gave no details about when the bonds would mature although the coupon rate is estimated to range from 0.5 to 3 per cent.

Of the total proceeds, 1.65 billion yuan would be used to finance the construction of six panamax 76,000 deadweight dry cargo bulk carriers, with 1.01 billion yuan earmarked for three 110,000 deadweight tonnes aframax tankers. The remaining cash would help finance eight tankers of 48,000 deadweight tonnes and two 308,000 deadweight tonne supertankers.

The ships have already been ordered and are among the 101 ships, totalling 954.3 million deadweight tonnes, which will be delivered to China Shipping Development between now and 2013. The firm forecast capital expenditure of 20.6 billion yuan on these ships. It had 225 ships of 13.84 million deadweight tonnes in its fleet last year.

Asked if the firm faced any difficulties arranging finance through mainland banks as a result of Beijing's clampdown on lending, Wang said it would turn to international banks to bankroll its fleet expansion programme. He said 70 per cent of the price of a ship would be financed by banks, with the rest coming from the firm's cash reserves.

Li confirmed the company would enter the liquefied natural gas transportation business in the next five years after at least two years of discussions. The company has already set up China Eastern LNG Shipping Investment with Sinopec and China Northern LNG Transportation with China National Petroleum Corp.

Li said while global demand for shipping capacity would grow this year, it would be unable to absorb all the ships that would be delivered this year so overcapacity of the global fleet 'will still be grim'.

He thought China's coastal oil transportation market would continue its steady growth this year. The company has signed dry cargo coastal shipping contracts for slightly higher volumes and higher rates than last year.

Net profit soars

Net profit surged by this percentage to 1.72 billion yuan last year, up from 1.07 billion yuan a year earlier: 61.2%