Hong Kong shipping and logistics

World’s largest ship lessor Seaspan gets fresh funds as new shareholder Fairfax doubles down on investments

With new shareholder Fairfax, Seaspan said it is ready for growth from increasing China trades under belt and road plan, offsetting risks from US China trade war

PUBLISHED : Thursday, 31 May, 2018, 7:19pm
UPDATED : Thursday, 31 May, 2018, 11:35pm

Seaspan, the world’s largest independent lessor of container ships, said its new shareholder will double down on its investments and inject a combined US$1 billion into the Hong Kong-based company, giving it the financial fire power to modernise, expand and invest in new businesses as global trade slowly claws its way out from a decade-long slump.

Fairfax Financial Holdings, the Canadian investment company, on Thursday announced that it would invest an additional US$500 million of equity in Seaspan through exercising two tranches of warrants. That comes on top of an earlier US$500 million invested through the purchase of Seaspan’s debentures.

The combination of the two exercises means an infusion of fresh capital, as Fairfax’s 50 per cent owner Prem Watsa, who’s often mentioned in the same breath in Toronto as Warren Buffett, replaces the Washington family as largest owner of Seaspan.

“We see a lot of growth opportunities such as from our biggest customer COSCO, which is at the forefront of carrying out China’s historical mission in making investment” through the maritime routes along the old Silk Road from China to Europe, said Seaspan’s president and chief executive Chen Bing, during an interview in Hong Kong.

An estimated US$1 trillion of goods were traded last year between China and the economies along the route of the ancient Silk Road, dubbed Belt and Road Initiative by the Chinese government. That’s larger than the US$640 billion of bilateral commerce between the US and China, the two largest economies on the planet.

That amount of trade allows China’s economy to be “well hedged” against any disruptions in the event of a worsening trade relations with the US, Chen said. The two economies are currently engaged in a tit-for-tat tussle, threatening to impose tariffs on each other in a dispute over the trade gap between them.

“If you look at where the growth sources of trade are coming from, they are from the northern to the southern hemisphere,” Chen said in an interview with the South China Morning Post. “There are also pockets of regional trade around Southeast Asia, Central Asia, South Africa, all corresponding with countries covered by the Belt and Road programme.”

Seaspan currently operates a fleet of 112 ships, with a combined capacity to carry 900,000 containers (20-foot equivalent units, or TEUs). Such capacity would put the company in a good position to capitalise on any growth opportunity if China’s trade were to expand with any part of the world, Chen said.

One area of investment Chen said is in the use of cloud computing. He said the company has been leveraging on the technology to better manage and capture data to improve vessel performance and reduce operating costs.

Seaspan’s shares rose for the second day overnight, rising 4.3 per cent in New York to a three-day high of US$8.80, giving the company a market value of US$1.2 billion.