China leasing giants linked to CMA CGM megaship orders
ICBC Financial Lease and CMB Financial Leasing are in the final stage to strike a financing deal for the 10 15,500 teu containerships that the French carrier is ordering in China, sources say
The leverage ratio that CMA CGM gets from the lessors is said to be close to 90%, which is part of the reason that puts off other competition lenders
TWO major Chinese ship leasing houses are close to agreeing a deal with CMA CGM to fund the shipping line’s mega newbuilding project worth over $1bn.
ICBC Financial Leasing and CMB Financial Leasing will each fund five 15,500 teu containerships that the French carrier is about to order at two subsidiary yards of China State Shipbuilding Corp, according to people familiar with the matter.
The orders, which have yet to be finalised, were first revealed by broker reports earlier this year.
Lloyd’s List understands that Jiangnan Shipyard will build five units fuelled by liquefied natural gas for more than $130m apiece, while Hudong-Zhonghua Shipbuilding will take the scrubber-fitted quintet at a price that is about $20m lower each.
Sources said the deal had drawn tenders from a number of large shipping lessors in China, including CSSC’s own leasing arm -- CSSC (Hong Kong) Shipping -- which was earlier thought by some to be the financier of the project.
“They [CSSC Hong Kong] had a try, but they didn’t have enough funds.” said one source.
The leverage ratio that CMA CGM obtains from ICBC Leasing and CMB Leasing is understood to be close to 90%.
The arrangement is structured as financial lease, in which the lessee is obligated to buy back the ships upon the competition of bareboat charters of more than 10 years.
The deal has received board approvals from all parties, which are poised to put pen to paper on a formal contract.
CMA CGM did not immediately respond to a request for comment.
Leading household names in the liner shipping industry are normally viewed as top-tier clients for Chinese leasing firms, and hence are better positioned to bargain with the lenders for higher loan-to-value ratio and lower borrowing costs.
CMA CGM, the world's fourth-largest container shipping carrier after its Ocean Alliance partners Cosco Shipping and Orient Overseas International Ltd merged last year, ordered nine LNG-fuelled 22,000 teu vessels in China in 2017.
ICBC Leasing and CMB Leasing, both backed by giant parent banks, are among the largest players in the sector. The former topped a league table composed by consultancy Smarine Advisors with $3.2bn of shipping investment made last year, while the latter invested $1.5bn and ranked in third position.