FSL

More articles on First Ship Lease Trust IPO.

First Ship Lease Trust launches IPO of 220 mln shares; 98 USD each

SINGAPORE (XFN-ASIA) - First Ship Lease Trust (FSL Trust), which operates a fleet of tanker and container ships, said it has launched its initial public offering of 220 mln shares priced at 0.98 usd each.

The IPO comprises a retail tranche of 7 mln shares and a placement tranche of 213 mln shares.

FSL Trust is expected to start trading on the Singapore Exchange on March 27.

Separate from the IPO, FSL Trust is also selling another 160 mln shares to the IPO's sponsors and a further 120 mln shares to cornerstone investors.

The sponsors of FST Trust include Schoeller Holdings Ltd, HSN Norbank AG, Bayerische Hypo und Vereinsbank AG and BH Ship Leasing Corp.

Among FSL Trust's cornerstone investors are Penta Investment Advisers, DWS Investment GmBH and AIG Global Investment Corp (Singapore) Ltd.

In total, FSL Trust said it would raise 490 mln usd in gross proceeds from the IPO as well as the sale of shares to its sponsors and cornerstone investors.

The proceeds will largely be used to finance the acquisition of 13 vessels, valued at around 427 mln usd, being injected by the sponsors into FSL Trust, as well as to fund the group's working capital requirements. Based on its IPO price, FSL Trust said it expects to pay an annualized distribution 0.0852 usd per share this year, equivalent to a distribution yield of 8.69 pct.

FSL's IPO makes it S'pore's biggest business trust



It will raise over US$215m from 220m shares at 98 US cents each



By MATTHEW PHAN



(SINGAPORE) First Ship Lease Trust (FSL), which acquires and leases shipping assets, is seeking an SGX-listing that will make it the third and largest business trust on the local bourse by market capitalisation.



The trust is raising over US$215 million from an offer of 220 million shares at 98 US cents each, and will achieve a market cap of some US$490 million at this price.



FSL will channel the IPO proceeds into acquiring 13 vessels, including container ships, tankers and dry bulk carriers. These are on long-term lease to five customers, with an average remaining lease term of about nine years.



The size of the public offer is seven million units, or just over 3 per cent of the total offering. Another 213 million shares will be privately placed, with an over-allotment option for another 34 million units.



If this is fully exercised, public and institutional investors will own 51 per cent of FSL after the offering, with sponsor First Ship Lease owning a quarter of the trust. The remainder will be held by three cornerstone investors.



The trust is promising investors a projected tax-free annualised distribution yield of 8.69 per cent, based on the issue price. To protect this yield, the trust has a unique subordination structure, under which the sponsor will subordinate half of its dividend entitlement and the manager will subordinate 100 per cent of fees to a target dividend.



It has also subordinated the dividend entitlement and management fees to minimum distribution targets running through to the first half of 2009. According to these targets, the annualised dividend yield will grow to 10 per cent of the offering price for the 1H09.



FSL targets acquisitions worth US$200 million annually, at average asset yields of 10.5 per cent. It will be debt-free on the listing date, but has a target debt-equity ratio of 1:1, which means it has debt capacity for an extra US$400 million, said Philip Clausius, CEO of FSL Trust Management.



It already has in place a debt facility of US$250 million, so FSLT 'is not at the mercy of equity markets when raising funds for growth', he said.



Mr Clausius, who founded the sponsor First Ship Lease before the trust was structured, said its business model shields investors from ship-operating risk and from the shipping cycle. The trust leases ships on bareboat charter, which means the lessees are responsible for outfitting and running them. It only acquires ships with a lease in place, and as the charters are made on a long-term basis, the trust and its investors are protected from short-term shipping cycle fluctuations, as long as the lessee is robust.



'At bottom, we are booking long-term annuities with customers that we deem creditworthy. The substantial risk that the trust has is customer default - there is no more important decision than who we are going to lease an asset to,' Mr Clausius said.



Are potential acquisitions then subject to risks from fluctuations in freight rates? Again, Mr Clausius said no. If freight rates decline, then the asset price will decline, so that even though the absolute income goes down, asset yield remains stable.



The sponsor's shareholders - commercial and maritime banks HSH Nordbank and HVB, and ship management firm Schoeller Holdings - also help to reduce risk and provide acquisition opportunities for growth, he said.



Schoeller owns Columbia Shipmanagement, which will provide FSL the technical expertise it needs to evaluate shipping assets. It can also operate assets that FSL is forced to take back in case of customer default.



HSH and HVB are 'large players in ship mortgage financing markets' with whom FSL is 'largely serving a similar target customer base but offering different financing options'. FSL can leverage their sales forces and contacts to originate transactions, Mr Clausius said, while the banks benefit by having an extra option to offer clients.



FSL's offer opened yesterday evening and closes at noon on March 22.